ML050960040

Status of Decommissioning Funding

ML050960040
Person / Time
Site:	Palo Verde
Issue date:	03/30/2005
From:	Overbeck G Arizona Public Service Co
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
102-05238-GRO/TNW/DWG
Download: ML050960040 (200)

Text

Z A LS A subsidiary ofPinnacle West CapitalCorporation 50.75(f)(1)

Gregg R. Overbeck Mail Station 7602 Palo Verde Nuclear Senior Vice President TEL (623) 393-5148 P.O. Box 52034 Generating Station Nuclear FAX (623) 393-6077 Phoenix, AZ 85072-2034 102-05238-GRO/TNW/DWG U. S. Nuclear Regulatory Commission March 30, 2005 ATTN: Document Control Desk Mail Station P1-37 Washington, DC 20555

Subject:

Palo Verde Nuclear Generating Station (PVNGS)

Units 1, 2, and 3 Docket Nos. STN 50-5281529/530 Status of Decommissioning Funding In accordance with the requirements of 10 CFR 50.75(f)(1), Arizona Public Service Company (APS) is submitting the status of the decommissioning funding for PVNGS Units 1, 2, and 3. APS is relying upon the 2004 Annual Funding Status Report from each Participant Owner in providing the information in this report with respect to each Participant's current funds, as well as future funding plans and assumptions.

The report and its appendices, provided in Enclosure 1, contain the status of decommissioning funding for each PVNGS unit and for each of the owners.

This letter does not make any commitments to the NRC.

If you have any questions, please contact Thomas N. Weber at (623) 393-5764.

Sincerely, CI./e GRO/TNW/DWG/ca

Enclosure:

1. 2004 Decommissioning Funding Status Report for Palo Verde Nuclear Generating Station Units 1, 2 & 3 cc: B. S. Mallett M. B. Fields G. G. Wamick A. V. Godwin [ARRA]

A member of the STMRS (Strategic Teaming and Resource Sharing) Alliance Callaway a Comanche Peak

• Diablo Canyon

• Palo Verde

• South Texas Project

• Wolf Creek

Enclosure 1 2004 Decommissioning Funding Status Report for Palo Verde Nuclear Generating Station Units 1, 2 & 3

2004 DECOMMISSIONING FUNDING STATUS REPORT 10 CFR 50.75(f)(1)

(For The Year Ending December 31, 2004)

PALO VERDE NUCLEAR GENERATING STATION, UNITS 1,2 & 3 Submitted on Behalf of Arizona Public Service Company Salt River Project Agricultural Improvement and Power District El Paso Electric Company Southern California Edison Company Public Service Company of New Mexico Southern California Public Power Authority Los Angeles Department of Water and Power Page 1 of 5

OVERVIEW This Decommissioning Funding Status Report is being submitted pursuant to 10 CFR 50.75(f)(1) by Arizona Public Service Company (APS) as the operator of Palo Verde Nuclear Generating Station (PVNGS), Units 1, 2 & 3. APS is submitting this report on behalf of the seven Participants in PVNGS:

Participant %Share of Each Unit

1. Arizona Public Service Company (APS) 29.10

2. Salt River Project Agricultural Improvement and Power District (SRP) 17.49

3. El Paso Electric Company (EPE) 15.80

4. Southern California Edison Company (SCE) 15.80

5. Public Service Company of New Mexico (PNM) 10.20

6. Southern California Public Power Authority (SCPPA) 5.91

7. Los Angeles Department of Water and Power (LADWP) 5.70 Pursuant to Sections 8A.4 and 8A.7.2.4 of the PVNGS Participation Agreement, as amended through Amendment 14, each Participant provides an annual decommissioning funding status report for review by the Termination Funding Committee established pursuant to the PVNGS Participation Agreement. APS is relying upon the 2004 Annual Funding Status Report from each Participant in providing the information in this report with respect to each Participant's current funds, as well as future funding plans and assumptions.

(1) DECOMMISSIONING FUNDS ESTIMATED TO BE REQUIRED In a report dated February 2002, TLG Services. (TLG) issued the 2001 site-specific Decommissioning Cost Study for PVNGS. This study includes cost estimates for basic NRC radiological decommissioning within the meaning of 10 CFR 50.75(b) & (c) (hereafter, Basic Radiological Decommissioning), as well as for spent fuel management and for non-radiological decommissioning activities.

The 2001 Total Decommissioning Costs for each unit and the Basic Radiological Decommissioning costs can be broken down as follows (in millions of dollars):

PVNGS Unit Total Decommissioning Basic Radiological Cost Estimate Decommissioning Unit 1 $615.8 $481.3 Unit 2 $673.3 $539.8 Unit 3 $683.0 $537.7 Each participant is entitled to exercise its own judgment regarding additional contingency factors and scope of work beyond the scope of work assumed in TLG's site specific study. In addition, assumptions regarding decommissioning cost escalation and trust fund earnings may affect funding levels. Therefore, Participants may accumulate funds based upon a Basic Radiological Page 2 of 5

Decommissioning Cost Estimate and Total Decommissioning Cost Estimate that exceed the amounts noted above. Regardless of such independent judgments, each Participant meets NRC requirements for purposes of estimating the decommissioning funds to be required, because the site specific estimates of costs noted above for the Basic Radiological Decommissioning of each PVNGS unit exceed the NRC minimum formula amount calculated in accordance with 10 CFR 50.75(c), NUREG-1 307, Rev. 10, Report on Waste Burial Charges:

Changes in Decommissioning Waste Disposal Costs at Low-Level Waste Burial Facilities, and Regulatory Guide 1.159, Assuring the Availability of Funds for Decommissioning Nuclear Reactors, as of September 2003.

(2) AMOUNT OF FUNDS ACCUMULATED AS OF DECEMBER 31. 2004 The total amounts of funds accumulated by each Participant in their respective Nuclear Decommissioning Trusts for each unit as of December 31, 2004 are provided in Appendix A, Tab 1 (Unit 1), Tab 2 (Unit 2), & Tab 3 (Unit 3). These values reflect the fair market value as reported by the respective Trustees at the end of calendar year 2004. In addition, in order to put the current levels of funding in perspective, the charts for each unit provided in Appendix A include:

(1) a breakdown for each unit of each Participant's percentage share of the 2001 Total Decommissioning Cost Estimate and (2) the years remaining on the unit's operating license. Note that the cost estimates are in 2001 dollars and do not take into account the individual assumptions made by each Participant, which may result in the accumulation of funds based upon higher cost estimates (e.g.,

site-specific estimates that may include removal and disposal of spent nuclear fuel and non-radioactive structures).

(3) SCHEDULE OF ANNUAL AMOUNTS REMAINING TO BE COLLECTED AND ASSUMPTIONS Pursuant to the Participation Agreement, as amended and reformed, the Participants agreed that each Participant would commit to minimum levels of accumulation of funds, regardless of fund investment performance, pursuant to a pre-established percentage funded commitment or "Funding Curve" for each year through the end of plant life. Each Participant's percentage funding commitment was based upon an analysis which incorporated the Participant's individual business judgments (subject to regulatory approvals, as applicable) with respect to expected rates of fund investment earnings and escalation in total decommissioning costs. Every three years a site-specific decommissioning cost estimate is performed, and each participant applies the new cost estimate to its pre-established Funding Curve. A new Decommissioning Cost Estimate will be completed in 2005 for the year ending in 2004. Each Participant is committed to minimum levels of accumulations, which cannot drop below a Funding Floor (which is never less than eighty percent of the Participant's Funding Curve and was established to take into account market fluctuations in the early years of fund accumulation). These minimum commitment levels are based upon the liquidated, after-tax value of the funds. As such, the unliquidated values relied Page 3 of 5

upon for purposes of NRC's decommissioning financial assurance requirements currently exceed these minimum commitment levels with respect to funds held by the investor-owned utility Participants in PVNGS. For the non-investor-owned Participants, the liquidated and unliquidated values are the same.

The current accumulation and funding schedules submitted in the 2004 Annual Funding Status Reports are based upon a 2001 site specific decommissioning cost estimate, that is escalated by each Participant. The tables and charts submitted by each Participant in the 2004 Annual Funding Status Reports are provided in Appendix B, Tabs 1, 2, 3, 4, 5, 6 & 7. (These Tabs correlate with the numbers assigned to Participants in the "Overview" above, which were assigned in descending order based upon the percentage share size of each Participant.)

The assumptions underlying each Participant's analysis are provided in Section 2.1.7 of the 2004 Annual Funding Status Reports. These assumptions reported by each Participant are restated, respectively, in Appendix B, Tabs 1, 2, 3, 4, 5, 6

&7.

Actual annual contributions of each Participant may vary from the annual contributions reflected in the tables provided in Appendix B, based upon actual fund performance and other factors. Each Participant is committed to maintaining the accumulation of funds established by the funding percentage curves, rather than any pre-established annual contribution.

(4) CONTRACTUAL OBLIGATIONS PURSUANT TO (e}(1)(v)

No PVNGS Participant is relying upon a contract for purposes of providing decommissioning funding within the meaning of 10 CFR 50.75(e)(1)(v).

(5) MODIFICATIONS TO LICENSEES' METHODS OF PROVIDING FINANCIAL ASSURANCE SINCE PREVIOUS REPORT There have been no modifications to the licensees' methods of providing financial assurance.

(6) MATERIAL CHANGES TO TRUST AGREEMENT The Master Trust Agreements of each of the Participants have been amended as referenced below:

Participant Date Amended Reference Location APS December 19, 2003 Appendix C, Tab 1 SRP November 19, 2003 Appendix C, Tab 2 EPE December 18, 2003 Appendix C, Tab 3 SCE December 23, 2003 Appendix C, Tab 4 PNM December 16, 2003 Appendix C, Tab 5 Page 4 of 5

SCPPA November 1, 2003 Appendix C, Tab 6 LADWP February 4, 2004* Appendix C, Tab 7 There have been no other amendments to the Trust Agreements of the various Participants since the last status report to the NRC.

The following Table provides the names of the current Trustees and Investment Managers as reported by each Participant in Section 1.1 of their 2004 Annual Funding Status Reports to the Termination Funding Committee.

Participant Trustee(s) Investment Manager(s)

APS Mellon Bank NISA Investment Advisors Mellon Capital Delaware Investment Advisers SRP Marshall & lisley The Vanguard Group Trust Company of PIMCO Capital Management Arizona EPE Bank of America, N.A. Duff & Phelps Investment Management SCE Mellon Financial STW Fixed Income Management PanAgora Asset Management BlackRock Financial Management Alliance Bernstein PIMCO State Street Global Advisors PNM Mellon Bank, N.A. Strong Capital Management First Quadrant, LP T. Rowe Price Associates, Inc.

Philadelphia International Advisors SCPPA US Bank Trust, N.A. None LADWP US Bank Trust, N.A. None

• The amendment to the master trust agreement was authorized by the Los Angeles City Council pursuant to Resolution 004 130 on December 2, 2003. The counter party to the amendment, the trustee, US Bank National Association, executed the amendment on February 4, 2004.

Page 5 of 5

Appendix A, Tab I Palo Verde Nuclear Generating Station Unit 1

($M)

Participants Total (1) NRC (1) Total Years Ownership Site Basic Nuclear to end of Specific Radiological Decommissioning Operating Estimate Estimate Trust License (as of 12/31/2004) (06/01/2025)

Arizona Public Service Company 29.10 % 179.2 140.0 88.1 (2) 20.5 Salt River Project Agricultural Improvement 17.49 % 107.7 84.2 51.3 (3) 20.5 and Power District El Paso Electric Company 15.80 % 97.3 76.0 30.5 (4) 20.5 Southern California Edison Company 15.80 % 97.3 76.0 194.3 (5) 20.5 Public Service Company of New Mexico 10.20 % 62.8 49.1 31.6 (6) 20.5 Southern California Public Power Authority 5.91 % 36.4 28.4 41.8 (7) 20.5 Los Angeles Department of Water and Power 5.70 % 35.1 27.4 31.7 (8) 20.5 TOTAL 100.00% 615.8 481.3 469.7 (1) - Decommissioning Cost Study for PVNGS in 2001 Dollars, prepared by TLG Services, Inc. (February, 2002)

(2) - Section 2.2 of APS 2004 Annual Funding Status Report (3) - Section 2.2.2 of PNM 2004 Annual Funding Status Report (4) - Section 2.2 of EPE 2004 Annual Funding Status Report (5) - Section 2.2.2 of SCE 2004 Annual Funding Status Report - Note: SCE accumulates funds based upon cost estimates that exceed the amounts noted above due to SCE judgments with respect to contingency factors also affected by assumptions regarding decommissioning cost escalation and trust fund earnings (6) - Section 2.2.2 of PNM 2004 Annual Funding Status Report (7) - Section 2.2.2 of SCPPA 2004 Annual Funding Status Report (8) - Section 2.2.2 of LADWP 2004 Annual Funding Status Report

Appendix A, Tab 2 Palo Verde Nuclear Generating Station Unit 2

($M)

Participants Total (1) NRC (1) Total Years Ownership Site Basic Nuclear to end of Specific Radiological Decommissioning Operating Estimate Estimate Trust License (as of 1213112004) (04/24/2026)

Arizona Public Service Company 29.10 % 195.9 157.1 94.2 (2) 21.3 Salt River Project Agricultural Improvement 17.49 % 117.8 94.4 50.3 (3) 21.3 and Power District El Paso Electric Company 15.80 % 106.4 85.3 31.6 (4) 21.3 Southern California Edison Company 15.80 % 106.4 85.3 196.5 (5) 21.3 Public Service Company of New Mexico 10.20 % 68.7 55.1 33.1 (6) 21.3 Southern California Public Power Authority 5.91 % 39.8 31.9 42.5 (7) 21.3 Los Angeles Department of Water and Power 5.70 % 38.4 30.8 31.6 (8) 21.3 TOTAL 100.00% 673.3 539.8 480.2 (1) - Decommissioning Cost Study for PVNGS in 2001 Dollars, prepared by TLG Services, Inc. (February, 2002)

(2) - Section 2.2 of APS 2004 Annual Funding Status Report (3) - Section 2.2.2 of PNM 2004 Annual Funding Status Report (4) - Section 2.2 of EPE 2004 Annual Funding Status Report (5) - Section 2.2.2 of SCE 2004 Annual Funding Status Report - Note: SCE accumulates funds based upon cost estimates that exceed the amounts noted above due to SCE judgments with respect to contingency factors also affected by assumptions regarding decommissioning cost escalation and trust fund earnings (6) - Section 2.2.2 of PNM 2004 Annual Funding Status Report (7) - Section 2.2.2 of SCPPA 2004 Annual Funding Status Report (8) - Section 2.2.2 of LADWP 2004 Annual Funding Status Report

Appendix A,Tab 3 Palo Verde Nuclear Generating Station Unit 3

($M)

ParticiDants Total (1) NRC (1) Total Years Ownershi, Site Basic Nuclear to end of Specific Radiological Decommissioning Operating Estimate Estimate Trust License (as of 12/31/2004) (11/25/2027)

Arizona Public Service Company 29.10 % 198.8 156.5 85.2 (2) 22.9 Salt River Project Agricultural Improvement 17.49 % 119.5 94.0 51.9 (3) 22.9 and Power District El Paso Electric Company 15.80 % 107.9 85.0 27.6 (4) 22.9 Southern California Edison Company 15.80 % 107.9 85.0 212.1 (5) 22.9 Public Service Company of New Mexico 10.20 % 69.7 54.8 28.8 (6) 22.9 Southern California Public Power Authority 5.91 % 40.4 31.8 46.9 (7) 22.9 Los Angeles Department of Water and Power 5.70  % 38.9 30.6 31.7 (8) 22.9 TOTAL 100.00% 683.0 537.7 484.4 (1) - Decommissioning Cost Study for PVNGS in 2001 Dollars, prepared by TLG Services, Inc. (February, 2002)

(2) - Section 2.2 of APS 2004 Annual Funding Status Report (3) - Section 2.2.2 of PNM 2004 Annual Funding Status Report (4) - Section 2.2 of EPE 2004 Annual Funding Status Report (5) - Section 2.2.2 of SCE 2004 Annual Funding Status Report - Note: SCE accumulates funds based upon cost estimates that exceed the amounts noted above due to SCE judgments with respect to contingency factors also affected by assumptions regarding decommissioning cost escalation and trust fund earnings (6) - Section 2.2.2 of PNM 2004 Annual Funding Status Report (7) - Section 2.2.2 of SCPPA 2004 Annual Funding Status Report (8) - Section 2.2.2 of LADWP 2004 Annual Funding Status Report

Palo Verde Nuclear Generating Station Appendix B, Tab 1 Units 1, 2, & 3 APS 2004 Annual Funding Status Report Section 2.1.7 [Restated]

Summary of Model Assumptions Decommissioning Costs 2001 TLG Study escalated for three years Assumed Rate of Earnings 6.7500%

Assumed Rate of Cost Escalation 5.0000%

Contributions Quarterly

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT ONE Based on 2001 Cost Study Rate of ROWu 6.7500% Annal Peiod Rat of Return 1.6875% Quarte Period Rate of Retwn 5.0000% Annual Escaltion Fikut Quarter Secnd Quarter Quarter Fourth Quarter Controi) Contra Contt Con" Quarter Eanln Quar Ewnlngs Quarter Earn Quauter Earphg ANNUAL Year Conr E! to Date Conbti Esnkvs to Date Conlrlb EaEwti to Date Contrb E toDa CONTRt85 2004 82,378,934 2005 1.326.682 1,390.145 86.09.761 1.326.682 1.435,991 871.56,434 1,326.682 1,462,611 90.687,728 1.326.882 1,530.018 93,524,428 5,306.729 2006 1,326.682 1.578.225 96,429,335 1,328.682 1.827.245 99,383,262 1.326.662 1.677.093 102.387,037 1,328.682 1.727.781 105,441,501 5,306,729 2007 1.326.862 1.T79,326 106,547.508 1.326.682 1.831.739 111,705,930 1.326.862 1.685.036 114,917,850 1.326,682 1.939.235 118.163,567 5.306.729 2008 1.326.682 1,994.348 121,504,597 1,326.602 2.050,390 124,881.670 1,326,682 2.107.378 128,315,730 1,326.682 2,165,328 131,807,741 5,306,729 2009 1.326,682 2,224,256 135,356,679 1.326.682 2.264.178 138.989,539 1,326,682 2,345,111 142,641.332 1.326,682 2,407,072 148.375.087 5.306,729 2010 1,326,662 2.470.080 150.171.u49 1,326.682 2.534.150 154,032,681 1,326,s62 2.599.301 157,956.es 1.326.682 2.6685552 161,950,900 5.306.729 2011 1.326.682 2.732,921 166.010.503 1.32e68s2 2,801,427 170,138,613 1.326,682 2,871.089 174,336.364 1,32e6,82 2,941.926 178,604,993 5.306,729 2012 1,326,882 3.013,959 182,945,635 1,326.682 3,w07.208 187,359.525 1.328.682 3.161,692 191,847,86 1,326.682 3,237,433 196,412.015 5,306,729 2013 1.326,662 3,314,453 201,053.150 1,326.662 3,392,772 205.772,6e4 1.326,882 3,472,413 210.571.699 1,326,682 3,553.397 215,451,779 5,306,729 2014 1,326,682 3,635,749 220,414,210 1,326.882 3,719.490 225,460,382 1,326.682 3,604.644 230,591.708 1,326,682 3,891.235 235,809,626 5.306,729 2015 1,326,682 3,979,287 241.115.595 1,326.682 4,088,826 246.511,103 1,326,662 4,159,875 251.997,681 1,32,8682 4,252.461 257.576.804 5,306,729 2016 1,326.662 4,346,609 263.250,094 1,326.682 4,442.345 269,019,122 1,326,682 4,539,698 274,s65.502 1.326.681 4,638.693 280,850,876 5.306.728 2017 1.326,682 4,739,359 288,916.917 1,326.682 4.841,723 293.085,322 1,326,682 4,945,815 299.357.820 1,3286,82 5,0510663 305.735,165 5,306.729 2018 1.326,662 5,159,296 312,222.145 1.328,682 5,268.749 318.517,576 1.326.662 5.360.047 325,524,305 1,326,682 5,493,223 332.344,210 5.306,729 2019 1,326,682 5,608,309 339,279.201 1,326.682 5,725,337 348.331.220 1,32,8682 5.844.339 353,502,242 1,324,581 5,965,350 360.792,173 5.308.729 2020 1.326.882 6,088,368 368,207,224 1,326,682 6,213.497 375,747,403 1.326.682 6,340.737 383,414,823 983,277 6,470.125 390,86225 5,306,729 2021 1.326.682 8,595,901 396,790,809 1,326,682 6.729,595 406.847.088 1,326,682 6,865,545 415,039.313 966,879 7,003,708 423,009,980 5,306.729 2022 1,326,682 7,138,293 431.474.956 1,320.682 7,281,140 440,082,778 1,326,682 7.426.397 448,835,858 924,568 7,574,105 457.334,530 5,30e,729 2023 1,328.682 7,717,520 466,378,733 1,326,882 7,870,141 475,575,556 1,326,682 8,025,338 484,927,578 (3,803,807) 8,183.153 489,306,922 5,306.729 2024 1,326,662 8.257,054 496,890s,59 1,326.682 8,418,7860 506,36121 1.328.682 6,583,235 518,548,038 (4,298,979) s,750.4e4 522,997,523 5,308,72s 2025 0 0 0 0 0 0 0 0 0 (57,073,249) 35,302.333 501,228607 0 2026 0 0 0 0 0 0 0 0 0 (99,672,231) 33.832,796 435.387,173 0 2027 0 0 0 0 0 0 0 0 0 (82,218,356) 29,388e.34 382,557,450 0 2028 0 0 0 0 0 0 0 0 0 (85.629.810) 25,822,628 322,750,4e8 0 2029 0 0 0 0 0 0 0 0 0 (89.068,070) 21,765,657 255,468,055 0 2030 0 0 0 0 0 0 0 0 0 (61,490,028) 17,244,094 211,222,121 0 2031 D 0 0 0 0 0 0 0 0 (22,289.955) 14,257,493 203,189,659 0 2032 0 0 0 0 0 0 0 0 0 (16,825,378) 0 186,364,283 0 2033 0 0 0 0 0 0 0 0 0 (25,832,320) 0 160,531,963 0 2034 0 0 0 0 0 0 0 0 0 (38203,547) 0 122,328.415 0 2035 0 0 0 0 0 0 0 0 0 (44,920,034) 0 77.40e,382 0 2036 0 0 0 0 0 0 0 0 0 (63.935,147) 0 13.473,235 0 2037 0 0 0 0 0 0 0 0 0 (13,473,235) 0 (0) 0 F WEIgA:

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ARIZONA PUBLIC SERVICE COMPANY NUCLEAR OECOMMISSIONING FUNDING REQUIREMENT UNIT ONE Base on 2001 Cost study ERafqb F~ eturn 5 0000%1 funding Curv t --- Funding Floor Actual Funding IYew Fund S Est. Cast  % Funded  % Band  % Floor S Floor $ InFund Eat. Cost  % FindedS 1991 8,358,799 122,538,455 8.82% 80% 5.46% 6,887,023 8,531,336 122,538,485 6.98%

1992 11,132.220 128.855.386 8.65% 80% 6.92% 8.905,776 11,159.326 128065,38 8.67%

1993 16.329.125 135,098,858 12.09% 80% 9.67% 13,063,300 14,474,518 135,098,658 10.71%

1994 21.885.801 141.853.590 15.43% 80% 12.34% 17,508,641 17,781,769 141 ,853.590 12.54%

1995 27,827.153 148,948,270 18.88% 80% 14.94% 22,261,723 24,489,181 148,946,270 16A3%

19m 30.0e1,526 137,672.888 21.85% 80% 17.48% 24,065,220 30,491.630 137,872.888 22.15%

1997 38.08,s854 144.558,530 24.95% 80% .19.96% 28,853,483 39,491.919 1 144.558.530 27.32%

1998 42,4540e4 151,784,358 27.97% 80% 22.38% 33,963.267 49.972.041 151.714,358 32.92%

1999 52,694,980 170,388,508 30.93% 80% 24.74% 42,155.984 80,615.123 170.388.508 35.58%

2000 e0.517.449 178,886,933 33.83% 80% 27.06% 48.413,980 62,792,455 178,8B6.933 35.10%

2001 ss.858.947 187,631,260 38.88% 80% 29.33% 55,087,158 64,409,937 187.831,280 34.29%

2002 74245,928 188.202.606 39.46% 80% 31.56% 59,396,742 63,343.559 188,202.608 33.88%

2003 83.353,052 197,612,736 42.18% 80% 33.74% 88,682,442 74,502,453 197,612,738 37.74%

2004 93,102.278 207,493,373 44.87% 80% 35.90% 74.481,821 82,378,934 207,493.373 39.70%

2005 103,509.107 217,868.042 47.51% 81% 38.48% 83,842,376 2006 114.855,238 228,781,444 50.12% 82% 41.10% 94.017293 2007 128,581,125 240,199.516 52.69% 83% 4373% 105,045,734 2008 139.320.523 252,209,492 55.24% 84% 46.40% 117,029,239 2009 152,933.531 284.819,966 57.75% 85% 49.09% 129,993,501 2010 167.503.925 278,060,965 6024% 86% 51.81% 144,053,376 2011 183,081.438 291,964,013 62.70% 87% 54.55% 159,283,449 2012 199,894,826 306,862,213 85.14% 88% 57.32% 175,731,271 2013 *217.501.292 321.890.324 67.57% 89% 80.14% 193.576,150 2014 238,555,690 337,984,840 e9.99% 90% 62.99% 212,900,031 2015 25ss900,587 354,884.082 72.39% 91% 85.87% 233.779,534 2016 278,651,433 372,628.288 74.78% 92% 68680% 256,359,318 2017 301.895.985 391,259,701 77.16% 93% 71.78% 280,783,266 2018 326,809.447 410,822.8S8 79.55% 94% 74.78% 307,200,880 2019 353,373,241 431.383,820 81.92% 95% 77.82% 335.704.579 2020 381,619,828 452,929.805 84.30% 9s% 80.93% 368.547.033 2021 411,916,988 475,215.720 88.88% 97% 84.08% 399,559,477 2022 444,052,014 498,598,713 89.06% 98% 87.28% 435,170,973 2023 478,380,828 523.108.428 91.45% 99% 90.54% 473,597,020 2024 s10,317,se5 543,874.738 93.83% 100% 93.83% 510.317.865 2025 538,938,033 585161.528 95.36% 100% 95.36% 538,938,033 2028 615,820.88 533,492,893 98.85% 100% 9s.85% 516,620,s88 2027 443.713,738 455.511,486 97.41% 100% 97.41% 443.713,738 2028 384,784,958 391,957,788 98.17% 100% 98.17% 384,784,958 2029 318.074,330 321,844.585 98.89% 100% 98.89% 318,074,330 2030 242.813.370 244,205,340 99.43% 100% 99.43% 242.813,370 2031 191,851,078 191.851.078 100.00% 100% 100.00% 191,851,078 2032 178,039.179 178,039,179 100.00% 100% 100.00% 178.039,179 2033 169,274,493 169,274.493 100.00% 100% 100.00% 189274,493 2034 150,614,282 150,614,282 100.00% 100% 100.00% 150.614,282 2036 118,031,271 118,031,271 100.00% 100% 100.00% 118,031,271 2038 76,788.800 76,.76,800 100.00% 100% 100.00% 76,788,80 2037 13,473,235 13,473,235 100.00% 100% 100.00% 13,473,235 FtEWuA

w j x c u a c c o u n ru1XHN

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOHM15MIONING FUNDING REQUIREMENT UNIT ONE 120%

100%

80%

01) 5 60%

U-1 40%

20%

0%

1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 9 9 9 0 0 0 0 0 0 0 0 0 0 0 0 0 9 9 9 0 0 0 0 1 1 1 2 2 2 3 3 3 1 4 7 0 3 6 9 2 5 8 1 4 7. 0 3 6 Year

-+- Funding Curve -- x- Funding Floor

• Actual Funding wume

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT TWO Based on 2001 Cost Study Rate of Retu 6.7500% Annual Periot Rate of Return 1.0875% Quarter Pe1t Rate of ReOW 5.0000% Anuall Escalation First Quarter Second Quarter Third Quarter Fourth Quarter ContWb Contib Contrib ConIwib Quarter Eamnings Quarter Earnings Quarter Earnings Year Contrib Erns Quart Earnings ANNUAL toDa Conbtib Earnings to Date Contrib Earnings to Date Contrib Earnings to Dale CONTRIBS 2004 2005 1,309.945 1,512,896 89,653,081 92.475,921 1,309,945 1,560,531 95.348,398 1,309,945 1,608,970 98,265,313 1,309,945 2008 1,309,945 1,708,315 1,658,227 101,233,485 5,239,780 104.251,748 1,309,945 1,759,248 107,320,939 1.309,945 1,811,041 110,441,925 1,309,945 2007 1,309,945 191 7.263 1,863,707 113,615,577 5,239,780 116,842,785 1,309,945 1,971,722 120,1274452 1,309,945 2,027,100 123,461,497 1,309,945 2008 1.309,945 2,083,413 126,854,655 5,239,780 2,140.676 130.305,47b 1,309,945 2,198,905 133,814,326 1,309,945 2,258,117 137,382,388 1,309,945 2009 1,309.945 2,379,555 2,318,326 141,010,661 5,239,760 144.700,161 1,309,945 2,441,815 148.451.921 1,309,945 2,505,126 152,266,992 2010 1,309,945 1,309,945 2,569,505 158,148,443 5,239,780 2.634,971 160,091.359 1,309,945 2,701,542 164,102,84 1,309,945 2,769,236 168,182,026 2011 1.309,945 1,309,945 2,838,072 172,330,043 5,239,780 2,908,069 176,548,058 1,309,945 2,979,248 180,837,251 1,309,945 3,051,629 185,198,825 2012 1.309,945 1,309,945 3,125,230 189,634,000 5,239,780 3,200,074 194,144,019 1,309,945 3,276,180 198,730,144 1,309,945 3,353,571 203,393,661 2013 1,309.945 1,309,945 3,432,268 205,135,874 5,239,780 3,512,293 212,958.112 1,309,945 3,593,668 217,861,725 1,309,945 3,676,417 222,848,086 2014 1.309.945 1,309,945 3,760,561 227,918,593 5,239,780 3.846,126 233,074,664 1,309,945 3,933,135 238.317,744 1,309,945 4,021,612 243,649,301 2015 1,309,945 1,309,945 4,111,582 249,070,828 5,239,780 4,203,070 254,583,844 1,309,945 4.298,102 260.189,891 1,309,945 4,390,704 265,890,541 2016 1.309,945 1,309,945 4,486,903 271,667,389 5,239,760 4.584.725 277,582,058 1.309,946 4,684,197 283,576,201 1,309,945 4,785,348 289,671,494 2017 1,309,945 1,309,945 4,888,206 295,869,846 5,239,760 4,992,600 302,172.391 1,309,945 5,099,159 308,5e1,495 1,309,945 5,207,313 315,098,753 2018 1,309,945 1,309,945 5,317,291 321,725,989 5,239,780 5,429,126 328,465.061 1,309,945 5,542,848 335,317.854 1,309,945 5,858,489 342,288,287 2019 1,309,945 1.309,945 5,776,081 349,372,314 5,239,760 5,895,658 356,577,916 1,309,945 6,017,252 383,905,114 1,309,945 6,140,899 371,355,95a 2020 1.309,945 6,394,487 1,309,945 6,268,632 378,932,534 5,239,780 386,636,966 1,309,945 6.524,499 394,471,410 1,309,945 6,856,705 402,438,060 2021 1,309,945 6,927,848 1,309,945 6,791,142 410,639147 5,239,760 418,778,941 1,309,945 7.066,861 427,153,747 1,309,945 7,208,219 435,671 ,911 2022 1.309.945 7,498,133 1,309,945 7,351,963 444,333,820 5,239,780 453,141,t98 11309,945 7,b4b,770 482,098,612 1,309,945 7,797,914 471,206,472 2023 1,309,945 8,107,898 489,885,669 1,309,945 7,951,609 480,468,026 5,239,780 1,309,945 6,268,824 499,462,638 1,309,945 8,428.432 509,201,015 1,309,945 2024 1,309,945 8,759,875 529,178,548 8592787 519,103,727 5,239,780 1,309,945 8,929,804 639.413.296 1'309,945 9,102,599 649,825.841 1,309,946 2025 1,309.945 9,456,968 571,181,030 9,276,311 50.414,097 5,239,780 1,309,945 9,638,680 582,129,655 1D309,945 9,823,438 593,263,038 (31,335,919) 10,011,314 571,938,432 2026 0 0 0 0 5,239,760 0 0 0 0 0 (151,327,449) 38,605,844 459,216t,28 2027 0 0 0 0 0 0 0 0 0 0 (91,371,319) 30,997,136 398,842,644 2028 0 0 0 .0 0 0 0

.0 0 0 (79,678.114) 26,921,878 346,0s66408 2029 0 0 0 0 0 0 0 0 0 0 (80,006,174) 23,380,833 289,439;087 2030 0 0 0 0 0 0 0 0 0 0 (67,887,453) 19,537,137 241,088,751 2031 0 0 0 0 .0 0 0 0 0 0 (41,009,342) 16,273.491 2t16.352,90 2032 0 0 0 0 0 0 0 0 0 0 (21,456;6133) 14,603,821 209,500,107 2033 0 0 0 0 0 0 0 0 0 0 (25,866,985) 14,141,257 197,774,379 2034 0 0 0 0 0 0 0 0 0 0 (72,729,421) 0 125,044,959 2035 0 0 0 0 0 0 0 0 0 0 (47,636,577) .0 77,408,382 2036 0 0 0 0 0 0 0 0 0 0 (63,935,147) 0 13,473,235 2037 0 0 0 0 0 0 0 0 0 (13,473,235) 0 0 0 nFOe VmXC5LTEOWWIm n20AM

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT TWO ESTIMATED ANNUAL COSTS 2024 1.0XO VW"$Is PV Domn Yew FV Dam 6ww V u"b I 2 3 4 5 6 6 a 10 ii 12 13 14 196.*18.36 10,122,436 44,617,415 25.0.7.317 21.341.9 20,40,5m 16,493,07 9.4e.S37 4,726,106 5,42s,605 14,536.614 a.0e'so1 11,590,621 326,2354 2001 205.714,287 10,626,557 486*21,786 26,962,204 22,406.731 21,430,055 17,317,657 9.963.069 4,664,576 5,7D0,0SS 1S,263,445 6,521,244 12170,362 2442.567 200J 216,00,D002 11,150,19S 46.2f7f.7t 26,331,314 23,529,166 22,501,5 18,13,540 10.461.222 S,866,037 16.m0,617 9,67,20 2,564,65 204 22X600,02 11,717,964 51,731.266 29,747,80 24,705,826 23,936,63 16,062,717 10,99,263 5.473,445 6,264,2a 16,67,946 10,467,171 13.417,624 2,692,90 20DS 23J,140,02 12,303,6 54,317,182 31,M3ti274 25,940.6W 24,607,667 20,047.,3 5,747.116 6,59,503 17,669,345 11,022,030 14,01,715 2,627,576 2000 XO0,047,0D2 12,616.077 57,0D,724 32,767,037 27,237.93 26.046,3" 21,046.721 12,110,172 6.034.474 6,626,426 16.552,12 11,573,131 14,762.151 2.998,95 262,5409.S2 13,565,01 09,665,410 34,416,149 20,569,851 27n,0,764 2Z,102,20 12.715,661 72742,es 1.460,453 15,532,06 3,117,403 207 275,676.820 14,243,243 62,679,661 3s,iss,7M 30029,643 13.351.405 6.053,007 7 ,92 20,454,476 1,759,377 2009 26.716.223 23,207,317 16.306,449 3M.773 206.480.861 14,655.447 96.023.665 37,66,670 31,531,2 30150,36 14,019,"

24,327,603 6,0m,522 21.4n719 13,397," 17,124622 3.436,937 2010 303*,64 15,703216 9324,6"4 33,107,002 31,661,951 20,356,067 14,719,660 7.334,M. 6,421,546 22,551.059 14,067,213 17,661,16e 3,06,73 201 31g,130.379 16,4663.0 72,791,060 41,656,254 34,7`3,297 33345,049 2s,ees,37D 15,455,860 7,701,667 6,642,62 20.,76,612 14,770,574 1osese 3,786,223 2012 33SOltl,111 17,312,790 70,4Dtl4S 43,951,167 34,9070 2s,20s,e3s 16,226,766 6.066.77 9,2e4,n75 24,962,S43 15^,5,102 16,624237 3,976,e64 2013 351,841,242 16.176,432 00,252.177 46,140,725 36.062,006 20,616,071 17,040,229 8,661,110 6,746,669526,10067 16,264AN6 2015,446 4,177,61 2014 19,D07,201 64,264.76S 46,456,161 40,242,862 38,466,296 31,106,025 17,W6240 6,915,866 1033,444 27,410r,64 17,04,76 4,236,4 2015 67,O04.670 20,041.72 66.476.025 50,976,670 42,255,0W 22)46,063 40.406,564 32.865,0n 16,786,652 6,261,449 10,7467 26,761.501 17,63725 4,09,924 2019 407.300,21 21.043,815 2,690t,92 53422.916 44,267,756 42,430,043 34m7,m 16,726,195 t1,2e5s6e0 30,220,5 160651,411 24,096,464 4.836,115 2m7 427.65,226 22,066,006 97,547*S3 56,064.064 46.566,143 44,551,M45 32,00216es 20.713,505 10,320,66 11,646,864 21,731,60 16,793,62 25,301,369 6.077,621 2016 44,04,401 23,20,60 46,916,450 2S~0,56,374 102,424.374 46.7M,122 37,02,274 21.746,130 10.637.048 1.44e462 23,316,196 20,793,661 5.531,617 2019 471,500.915 24.3M,647 107,545,5" 61,6.4,706 51,"I1,2m na,see,m7 4%,116,076 22,85,526 11,e47,646 13,064,50534,694,09 ll,vmDm 6,506,406 2020 496.075,"1 neu,ozoe 25,576*9 112,62m.o72 64,9356,91 63,n92u36 51,673,662 41,677,007 23.677,313 13,717,614 367,300 22,914,008 20366,427 55676,326 1.0675 2021 516,826.75 20,867.834 116.54.016 M6,162,665 56,625,746 12,545,237 54,152,661 43,760,5s 25,176,179 14,403,705 3S20,5.a5 24,05,706 20,75266 *.17Z244 2022 645.21247 280,2.725 124,407.466 59,457,036 59,660,315 45,946,601 29,434,966 13,172.499 li,123,60 40.49,463 327 t104 6,40,067 2023 57,II2,209 2B,610,761 130,722,40 7M171,411 Q 429)6 56,702,63 46.246,$46 2756,737 13,63,124 15,690,05S 42,52,3,2 33,86,73 6,604,66 2024 601,767,920 31,061,20 137'6,457 78,929,961 05.5531.362 62,696,496 so~mass"e 29.144,674 16,674j,06 44,646,56 36,601,462 14,522s,6 27,662120 7,t14,44 32,646,66 10,122435 20ZS I 32,645,665 631,!85,321 3,45,611S 144,121.0 62,76,480 06,824.951 53,191,596 37,26.1$

15,246,814 17,507,794 46,662,033 26244,726 7,502402 141,756,734 44,.7,415 2.M,Wa~f 2026 5 151,37,446 629,170"7 151,22t.449 07,020,304 72,270699 90.114,009 55,951,176 160.11265 16,33,163 4,226,1s5 30,70e,Ms 2,260,634 33.9WI73 7,es77=2 0 ,181,461 20,97,337 2027 I t1.371,316 501.736.707 61,371.321 75.e3,916 ".5,42,735 33.736,467 16,611,616 19.3OZ43 51,67,441 32,242310 4547,5815 6,271,366 65.490,110 21,341,646 2020 7,67e,114 76.,676,14 61.575.$21 36,425.412 17,ss24m 43,273,934 76.19,261 20,207.460 54W1,613 33,664,426 6,ee4,sa 61,611,647 20.406.576 20Z S 60.0W6,174 20,764,717 95,0,174 64,664717 37,166,662 16.535.029 21,20,833 56.99404 365.47,147 6,119,216 46.67226 16,495007 200

• 67,667,f45 30,194.371 67,667,432 29,06e,517 16,461,761 22,344,674 86,.34,674 37,324,604 47.70.,301 6.57,177 27,712,47 9,460,637 2031 o 41,00,342 247,072.264 41OC342 20.434,670 23,462,119 e2,Qe,40s 32,16a,729 9,064,eo 10,063,6" 135642,66 4.726,166 2032 I 21,45 613 216,326,067 21,456,13 24.635,224 es,8e7,72s 41,150,264 10,556,633 15,3,21 S420,0s 203 t 20,666,es5 204,604,627 55n320,34 11,6.404 25,e6ea96 66,266,115 43,2077n 43,126,769 14,536,614 2034 I M7279.421 167,727" 72.729.421 45,306,166 S7,661,063 2,246,#X 6,067.661 203S I 47,6,577 120,747,14 47,63,517 1220,e2 37,913,737 1,6O0.21 2020 1 03,635,147 76,76,0DO 63,093,147 12631,6636 7,69 ,670 2.326.254 2037 1 13,03,220 13.473,235 13,473,2S

.o4 06 09, 7 *: ,::e e, 76.026,64

-0* 857,25so.0

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT lWO eased on 2001 Cost Study Rate of Rehun II 7500 lEscaaon Factot 5 0000%1 Funding Curve FundIng Floor Actual Funding Year FundS Eat Cost %Funded %BMnd %Floor $Floor SInFund Edt.Cost %Funded 1991 7,589,283 120,570,113 8.29% 80% 5.04% 8,071,428 7,786,931 120,570,113 8.40%

1992 10,494,062 126,598.819 8.29% 80% 6.63% 8,395,249 10,625,997 126,598.619 8.39%

1993 15,402,712 132,928,550 11.59% 80% 9.27% 12,322,170 14,545,580 132,928,550 10.94%

1994 20,651,178 139,574,977 14.80% 80% 11.84% 16,520.943 18,150,013 139,574,977 13.00%

1995 26,262,984 146,553,726 17.92% 80% 14.34% 21,010.388 25,307,510 146,553,726 17.27%

1996 29,965,846 142,898,646 20.97% 80, . 16.78% 23,972,677 31,299,677 142,898,646 21.90%

1997 35,920,433 150,043,579 23.94% 80% 19.15% 28,736,348 40,007,265 150,043,579 2e.68%

1998 42,285,281 157,545.757 26.84% 80% 21.47% 33,828,225 49,309,948 157,545,757 31.30%

1999 53,228,685 179,341.931 29.e8% 80% 23.74% 42,582,948 57,744,504 179,341,931 32.20%

2000 81,125,110 188,309,027 32.46% 80% 25.97% 48,900,088 63,153,205 188,309,027 33.54%

2001 89,559,472 197,724.479 35.18% 60% 28.14% 55,647,577 67,204,619 197,724,479 33.99%

2002 77,883,429 205,714,287 37.86% 80% 30.29% 62,306,743 70,594,925 205,714,287 34.32%

2003 87,436,801 218,000,002 40.48% 80% 32.38% 69,949;441 81,381,233 216,000,002 37.88%

2004 97,660,081 226.800.002 43.06% 80% 34.45% 78,128,065 89,653,081 226,800,002 39.53%

2005 108,591,841 238,140,002 45.60% 80% 36.48% 86,873,473 2006 120,297,613 a50.047,002 48.11% 81% 38.97% 97,441,086 2007 132.797,462 262.549,352 50.58% 82% 41.48% 108,893,919 2008 146,163,850 275,676,820 53.02% 83% 44.01% 121,315,995 2009 160,448,044 289,480,661 55.43% 84% 48.56% 134,776,357 2010 175,734,462 303,933,694 57.82% 85% 49.15% 149,374,293 2011 192,052,862 319,130.379 60.18% 86% 51.75% 185,185,289 2012 209,629,837 335,086,897 62.53% 87% 54.40% 182,290,958 2013 228,204,230 351,841,242 64.88% 88% 57.08% 200,819,722 2014 248,185,294 369,433,304 67.18% 89% 59.79% 220,884.912 2015 269,516,373 387,904,970 69.48% 90% 62.53% 242,564,736 2016 292,360,097 407,300218 71.78%. 91% 65.32% 286,047,688 2017 316,771,835 427,665,229 74.07% 92% 68.14% 291,429.904 2018 342,848,523 449,046.491 78.35% 93% 71.01% 318,849,126 2019 370,788,320 471,500,915 78.64% 94% 73.92% 348,541,020 2020 400,615,467 495,075,961 80.92%. 95% 76.87% 380,584,694 2021 432,550,342 519,829,759 83.21% 96% 79.88% 415,248,329 2022 466e,22,584 545,821,247 85.49% 97% 82.93% 452,823.906 2023 50S,135,296 573,112,309 87.79% 98% 86.03% 493,072.590 2024 542,132,723 601,767,925 90.09% 99% 89.19% 536,711,396 2025 583,835,240 631,856,321 92.40% 100% 92.40% 583,835,240 2026 590,980,301 629,170,979 93.93% 100% 93.93% 590,980,301 2027 478,906,732 501,735,707 95.45% 100% 95.45% 478,9s0,732 2028 416,749,858 430,882,807 96.72% 100% 96.72% 418,749,658 2029 359,545,599 368,784,717 97.50% 100% 97.50% 359,545,599 2030 297,888,469 303,194,371 98.25% 100% 98.25% 297,888,469 2031 244,502,712 247,072,264 98.96% 100% 98.96% 244,502.712 2032 215,154,417 216,366,087 99.44% 100% 99.44% 215,154,417 2033 204,654,927 204,654,927 100.00% 100% 100.00% 204,654,927 2034 187,727,339 187,727,339 100.00% 100% 100.00% 187,727,339 2035 120,747,814 120,747,814 100.00% 100% 100.00% 120,747,814 2036 76,766,800 76,766.800 100.00% 100% 100.00% 76,76e,800 2037 13,473,235 13,473,235 100.00% 100% 100.00% 13,473,235

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT TWO 120%

100%

80%

U1) r-60%

U-0 40%

20%

0%

I 1 1 2 2 2 2 2 2I 2 2 2 9 9 9 0 0 0 0 0 CI 0 0 0 9 9 9 0 0 1 1 1 2t 2 3 3 I 5 9 3 7 1 5 9 2I 7 I 5 Year

-.- Funding Curve --- Funding Floor

• ActualFunding MIc. W=EXC0mECO0D

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT THREE Based on 2001 Cost Study Rate of Retu 6.7500% Annual Period Rate of Return 1.6875% Quarter Period Rate of Return 5.0000% Annual Escalation First Quarter Second Quarter Third Quarter Fourth Quarter Contrib Contuib Contrib Contrib Quarter Earnings Quarter Earnings Quarter Earnings Quarter Earnings ANNUAL Year Contrib Earnings to Date Contrib Earnings to Date Contnb Earnings to Date Contrib Earnings to Date CONTRIBS 2004 80,413,842 2005 1,432,921 1,356,984 83,203,747 1,432,921 1,404,083 86,040,731 1,432,921 1,451,937 88,925,589 1,432,921 1,500,619 91,859,130 5,731,684 2006 1.432,921 1,550,123 94,842,173 1,432,921 1,600,482 97,875,556 1,432,921 1,851,650 100,980,127 1,432,921 1,703,702 104,096.750 5,731,684 2007 1,432.921 1,758,633 107,286,304 1,432,921 1,810,456 110,529,681 1,432,921 1,865,188 113,827,790 1,432,921 1,920,844 117,181,555 5,731,684 2008 1,432,921 1,977,439 120,591,915 1,432,921 2,034,989 124,059,824 1,432,921 2,093,510 127,588,255 1,432,921 2,153,018 131,172,194 5,731,684 2009 1,432,921 2,213,531 134,818,846 1,432,921 2,275,085 138,526,631 1,432,921 2,337,637 142,297,189 1,432,921 2,401,265 146,131,375 5,731,684 2010 1,432,921 2,465,967 150,030,263 1,432,921 2,531,761 153,994,945 1,432,921 2,598,665 158,026,530 1,432,921 2,666,698 162,126,149 5,731,684 2011 1,432,921 2,735,879 166,294,949 1,432,921 2,806,227 170,534,097 1,432,921 2,877,763 174,844,781 1,432,921 2,950,508 179,228,208 5,731,684 2012 1.432,921 3,024,478 183,685,604 1,432,921 3,099,895 188,218,220 1,432,921 3,176,182 192,827,323 1,432,921 3,253,961 197,514,205 5.731,684 2013 1,432,921 3,333.052 202,280,179 1,432,921 3,413,478 207,126,578 1,432,921 3,495,261 212,054,760 1,432,921 3,578,424 217,086,105 5,731,684 2014 1,432,921 3,662,991 222,162,018 1,432,921 .3,748,984 227,343,921 1,432,921 3,836,429 232,613,271 1,432,921 3,925,349 237,971,541 5,731,684 2015 1,432,921 4,015,770 .243,420,231 1,432,921 4,107,716 248,980,869 1,432,921 4,201,215 254,595,004 1,432,921 4,298,291 260,324,216 5,731,684 2016 1,432,921 4,392,971 298,150,108 1,432,921 4,491,283 272,074,312 1,432,921 4,591,254 278,098,487 1,432,921 4,692,912 284,224,320 5,731,684 2017 1,432,921 4,798,285 290,453,528 1,432,921 4,901,403 296,787,851 1,432,921 5,008,295 303,229,067 1,432,921 5,116,990 309,778,978 5,731,684 2018 1,432.921 5,227,520 318,439,419 1,432,921 5,339,915 323,212,255 1,432,921 5,454,207 330,099,383 1,432,921 5,570,427 337,102,731 5,731,e64 2019 1,432,921 5,688.609 344,224,261 1,432,921 5,808,784 351,485,9s6 1,432,921 5,930,988 358,829,875 1,432,921 6,055,254 366,318,050 5,731,684 2020 1,432,921 6,181,617 373,932,588 1,432,921 6,310,112 381,675,622 1,432,921 6,440,776 389,549.319 1,432,921 6,573,645 397,555,885 5,731,684 2021 1,432,921 6,708,758 405,897,561 1,432,921 6,846,146 413,976,628 1,432,921 6,985,856 422,395,405 1,432,921 7,127,922 430,956,248 5,731,684 2022 1,432,921 7,272,387 439,661,556 1,432,921 7.419,289 448,513,766 1,432,921 7,568,670 457,515,357 1,432,921 7,720,572 460,668,849 5,731,684 2023 1,432,921 7,875,037 475,978,807 1,432,921 8,032,109 485,441,838 1,432,921 8,191,831 495,066,588 1,432,921 8,384,249 604,853,758 5,731,684 2024 1.432,921 8,519,407 514,806,086 1,432,921 8,687,353 524,926,360 1,432,921 8,858,132 535,217,413 1,432,921 9,031,794 545,682,128 5,731,684 2025 1,432,921 9.208,386 556,323,435 1,432,921 9,387,958 587,144,314 1,432,921 9,570,560 578,147,795 (15,941,605) 9,756,244 571,982,434 5,731,684 2026 1.432,921 9.651,866 583,047,221 1,432,921 9,838,922 594,319.064 1,432,921 10,029,134 605,781,119 (21,056,546) 10,222,556 594,947,129 5,731,684 2027 0 0 0 0 0 0 0 0 0 (78,284,765) 40,158,931 556,841,295 0 2028 0 0 0 0 0 0 0 0 0 (108,331,772) 37,588,787 486,098,311 0 2029 0 0 0 0 0 0 0 0 0 (121,370,903) 32,811,501 397,536,909 0 2030 0 0 0 0 0 0 0 0 0 (94,002,988) 26,833,741 330,367,663 0 2031 0 0 0 0 0 0 0 0 0 (85,115,108) 22,299,817 267,552,375 0 2032 0 0 0 0 0 0 0 0 0 (77,183,325) 18,059,785 208,428,835 0 2033 0 0 0 0 0 .0 0 0 0 (45,373,645) 14,088,948 177,124,136 0 2034 0 0 0 0 0 0 0 0 0 (51,368,047) 11,955,879 137,711,968 00o 2035 0 0 0 0 0 0 0 0 0 (60,303,586) 0 77,408,382 0 2036 0 0 0 0 0 0 0 0 0 (63,935,147) 0 13,473,235 0 2037 0 0 0 0 0 0 0 0 0 (13,473,235) 0 (0)

F.ENAE:EXCELECOA&VAM8O EVI 22140

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT THREE ESTIMATED ANNUAL COSTS 2nf 1t060 Tug 6'V PW otiwo Yew WVOat OImIPV Umb a 10 tt 12 13 14 20et 0 194.742.233 5S3726 6.641202 2,OI1,240 26,016,463 30,.80,645 22,637,66 19.893.716 17,006077 6,233 10,267.062 11,47n,077 1I.5s0.o21 2.32624 20n2 1 206.679,34S s.65eU7 ,73,202 23,1soi 30.467.307 32,506.6 23,76,564 20m.,4c2 17,05e41 6,9.513 l0D,76,415 t2.053t03t 170.362 2,442567 2001 2 21t.113.312 6.63,460 7,32tA25 24,267.M92 31,0.673 34,134.42 25.17 6.42 21.712,322 16,751.406 10,496,43e l1.31S,430 12,666,662 12,77,60 2,X54,es 20W4 5 230eM.9? 6,26453 7.668.021 25,460.7M2 33503206 25,541,164 26,437,466 22,797,936 16,66,676 11.022.30 11.05.40 13,266,467 13,417,624 2X6Xno 2005 4 241,572,420 6,64,276 6,072.423 26,764.300 35,266,716 37.633,222 27,759,343 23,337,635 20,6n,424 11,674,526 12,476.676 1362,e90 14.,715 227,.S76 2006 5 253,651,040 6.676.660 ,476.044 26,09t540 37,033202 36,514,683 29,147,310 25.134,727 21,707,S6 12,153255 13I03.62 14.6,534 14,n3,l5l 2X9te5 2007 6 2ee,333.nP 7,21t4474 6,6,6s946 20,497.167 36,664.662 41,490,627 30,604,675 20.361,463 22762460 12,X76,17 13,756845 15,38301 1S6S32,30 X117.403 2008 7 2 n.6852 f 7,500,440 6,344,36 30.972.025 40,326,105 43,565,166 32,134,909 2.711.036 23,n32.072 13,396,63 14,446,767 16,152,214 16,30,446 32nm73 200f 6 203n63764 7,9506471 6.812.060 32,620.626 42.3M7,561 45,743,417 33,741,656 2n.oe s 20,126.576 146.Me 11 16,166,127 16.6,25 t7t124,9n 3,436,637 2010 9 306,314,434 3.357,444 10,302,664 34.14e.618 46,014,0 46,030.544 35,426,737 30,551,417 20,385.110 14,772m3s7 15,n27,663 177.6716 17,41,166 3.6047 2011 10 323,720,155 6,775,316 10,e17,e16 36,653,961 47264,763 50,432,117 37,200.174 3Z,076,666 27,704,66, 15,S51,675 6,M362 1WO96N,7 15,60226 3,75s23 NOi i1 33,oie,ess 6214,062 11, 68,306 37,A4,690 49,626.033 52,53,723 36,060,163 33.ne2.63n 26,6,8 16,26.524 17,60,160 WII7 16,824,237 3.67,64 2fis 12 6.912,4o 6,674,766 11,62.646 39.526.025 52.109435 s5,e.640e 41,013,162 35.367,064 30,544.053 17,100,650 16,438,16 20,e14.m 20,f16,449 4.17708 2014 13 374.766.121 10tt1,526 12,522O77 41,506,476 £4,714,306 56e361,479 43.0e3,s52 37,136,439 32,o7126 17.es582 19,380,077 21,645,612 21,em 4,39e,496 2015 14 3n,.49.027 10t,66,462 13.146,120 43,560.790 s7,450,e52 6t,300.M63 45,217,t44 36,662211 33,074.829 16,353.687 20,326.660 2Xn2r7.7a 2X246,o03 4056.324 2016 1s 413.170.626 11.196,774 13,.06,562 46,7s,767 60,323,104 64,30.581 47,477.807 40,641,62t 3s,356,571 1.76.371 21,344,485 23.64,177 24,66,464 4.6.116 2017 16 433,629,370 11.759,763 14,4968J11 48,047t77 63,n33,343 67.63.Me 49,e61,7i1 42J,9t12 37126,490 203.706,t 22,41i,70 25,057,365 25,3.309 5.077,21 2016 17 12347,761 151221757 50,4s0.105 *,5o.311 70,363,063 2344a,361 45,13,353 36,362,324 21.,49S 23.532.294 26.310,2 26,56,374 5.331,tT 2019 16 476.266.66 12.366.130 16,962.44 52.72.74 6e,831.626 74611,20 e4,01,60o 47.36276 40,31,3es 22,316,774 24,706,609 27,25,767 27*694.63 55ss.40e 2020 16 5e2211,725 13,613.,30 16,761,37 55,s2s,307 73,323,207 76,236,7e6 67.700690 46,765,039 42,676,666 24,02,613 25.a44.6 26.07wY. 2,26.427 5.M,326 2021 20 627322311 14.2M4.06 17,621.06 36.402,373 76,96.366 6S,146,604 e0o656.164 62,253,26 45,127,462 20,266,743 27,241,5n 30,457,406 39.M.W *172n244 2022 21 56.666.420 15i0m.n7 16,oN2140 61,322,4s1 *o,m.m 6e,25,035 63,624,22 64,365,356 47,33,66 20.52s,031 28.t061 31,360,2e6 3n2om 1,4 6,4s0,367 2023 22 61.372tU 15,756,207 16,427,247 64,366616 04,3.m 6o,5ee3e6 66e,60e,16 57, 6,264 46,753,060 27,35,462 30,031.M33 an,2n ss,06,173 6,604,396 2024 23 610,441.460 16,647,166 203,n3 6,1 67,eme,047 66,124,617 65.067276 70146,477 60,466.717 62,240J713 262462N 31,S535525 3S256,256 36,501,462 7,146,144 16,547,307 6,397,26 2025 24 17.374,626 640,663,664 17,374.526 21,4186540 70,366,446 93,561,.0 66,3 ,142 73,03,09 M3,514202 u4.e2,7w4 30J710,e6e 33,11210 37,021,171 37,36,556 7,50402 22,48,47 ,64122 26M 25 l4869,467 664,76.,490 22,4et,467 74,537,87I 6,260.111 104,544,746 77,336,46r1 eee,12 7A, 36 32M2M203 34.767616 3P72 36250e34 7,77,52 73,315,336 22.011,240 2027 26 76264,766 636 2974 7e,2e4,7es 1o03173.11611 0, 697 31,20331s 70.024.406 60,476,156 33,658,513 3e,506,312 40,15.1641 4121X3,1 61,396 65,064,675 26,016,463 2026 27 10t.331,772 614.6s9.Qe 10e,331.m 115,561,336 66 23 ,461 73,52.,6 63.496.613 35,551,436 3,331,26 42,656,33 43,273,24 6,6s4,6es 6,7r72s16 30,360 ,646 2026 29 121.37D.M 531,06740 121,370,303 6962 ,0 6 77,2 01,10 e,67,3 37,326,010 40,248206 44,s6,4e4 45.437,515 6,116,216 72,3,591 22.t 6937.6 2030 26 94.002,5 431,ee.630 64,002,9e e61,o2,00s 70,007s"t 36,165,461 42260,613 47,246,437 47,709,361 *.575,1m7 61,36,36 1e ,693716 mt 30 an.115.106 353612,624 6,116,106 73,502 41,156,234 44,373 4,611e,903 6004,60 I00o3,936 S1517,430 17,006,077 2032 31 77.13,325 262237.14 77,t13,325 4321tX8 46,51333 62062606 52,5e03 10,56,63 6722,313 6522,n3 2M3S 32 46,375,645 21S.3.773 45,373,645 48.321.646 54,667,130 5522,5a4 11,064,464 30.461,409 10267,062 2034 n 61,366,047 179429.794 61,3 .047 57,431,67 *7, t91,o0311,536,667 356,70211 11,479,077 2036 34 e0.303.6te 133,414,324 60.303,586 60,360,616 12*0,6n 37.13,737 11,560,61 2036 35 1,63n,147 7e,766,fl 63,935,147 12,631,653 7.3.670 2,326,2S4 2037 36 13,473235 13,47236 13,473235 35,363.n . 74t n1 636.666.61I

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT THREE Based on 2001 Cost Study Rate of Return .7500%

Emcalton Faco . 5O0000%

Funding Curve Funding Floor Actual Funding Year Fund $ Est. Cost % Funded  % Band  % Flor $ Floor $ In Fund Est. Cost  % Funded i 1991 8.006.475 127.342,404 6.29% 80.00% 5.03% 8,405,180 8,425,913 127,342,404 6.62%

1992 10,665,274 133.709,524 7.98% 80.00% 6.38% 8,532,219 10,625,686 133,709,524 7.95%

1993 15,618,562 140,395,000 11.12% 80.00% 8.90% 12,494,850 14,358,300 140,395,000 10.23%

1994 20,914,758 147,414,750 14.19% 80.00% 11.35% 16,731,805 17,548,946 147,414,750 11.90%

1995 28.577.594 154,785,488 17.17% 80.00% 13.74% 21,262,075 23,923,294 154,785,488 15.46%

1996 32,399,151 161.350,352 20.08% 80.00% 16.06% 25,919,321 29,189,706 161,350,352 18.09%

1997 38,830,576 169,417,870 22.92% 80.00% 18.34% 31.064,461 36,502,075 169,417,870 21.55%

1998 45,699,623 177,888,784 25.69% 80.00% 20.55% 36,559,699 44,699,986 177,888,784 25.13%

1999 54,784,199 192.831.688 28.40% 80.00% 22.72% 43,811,380 52,706,435 192,831,688 27.33%

2000 82.867.951 202,473,273 31.05% 80.00% 24.84% 50,294,381 56,260,185 202,473,273 27.79%

2001 71,538,869 212,596,936 33.65% 80.00% 26.92% 57,231,095 59,074.016 212,596,936 27.79%

2002 75,541,923 208,879,345 36.20% 80.00% 28.96% 60,433,538 61,165,704 208,679,345 29.31%

2003 84.818,763 219,113,312 38.71% 80.00% 30.97% 67,855,010 72,048,542 219,113,312 32.88%

2004 94,719,398 230,068,977 41.17% 80.00% 32.94% 75,775,518 80,413,842 230.068,977 34.95%

2005 105,325,578 241,572.428 43.60% 80.00% 34.88% 84,280,462 2006 116,654.117 253,651,048 45.99% 80.00% 36.79% 93,323,293 2007 128,772,296 26e.333,600 48.35% 81.00% 39.16% 104,305,559 2008 141,726,762 279.650,280 50.68% 82.00% 41.56% 116,215,945 2009 155,566,654 293,632,794 52.98% 83.00% 43.97% 129,120,323 2010 170,374,556 308.314,434 55.26% 84.00% 46.42% 143,114,827 2011 186.209,585 323,730,155 57.52% 85.00% 48.89% 158,278,148 2012 203.134,198 339,916,663 59.76% 86.00% 51.39% 174,695,410 2013 221.250,057 356,912,496 61.99% 87.00% 53.93% 192,487,549 2014 240,594,714 374,758,121 64.20% 88.00% 56.50% 211,723,348 2015 261,281,362 393,496,027 68.40% 89.00% 59.10% 232,540,412 2016 283,435,188 413,170,829 68.60% 90.00% 61.74% 255,091,670 2017 307,084,428 433,829,370 70.78% 91.00% 64.41% 279,428,630 2018 332.393,556 455,520,839 72.97% 92.00% 67.13% 305,802,071 2019 359,440,108 478.296,880 75.15% 93.00% 69.89% 334,279,298 2020 388,360,327 502,211,725 77.33% 94.00% 72.69% 365,058,707 2021 419,273,969 527,322,311 79.51% 95.00% 75.53% 398,310,271 2022 452,363,444 553.688.426 81.70%/9 96.00% 78.43% 434,288,906 2023 487,713,862 581.372,848 83.89% 97.00% 81.37% 473,082,271 2024 525,468,035 610,441,490 86.08% 98.00% 84.36% 514,958,674 2025 565,906,731 640,963,564 88.29% 99.00% 87.41% 560,247,664 2026 592,630,961 654.768,490 90.51% 100.00% 90.51% 592,630,981 2027 810,914,315 663,892,974 92.02% 100.00% 92.02% 610,914,315 2028 574,940,495 614,909,620 93.50% 100.00% 93.50% 574,940,495 2029 505,417,785 531,906,740 95.02% 100.00% 95.02% 505,417,785 2030 415,242,631 431,062,630 96.33% 100.00% 96.33% 415,242,631 2031 344,073,853 353,912,624 97.22% 100.00% 97.22% 344,073,853 2032 276,536,199 282,237,394 97.98% 100.00% 97.98% 276,536,199 2033 212,550,846 215.306,773 98.72% 100.00% 98.72% 212,550,848 2034 171,287.833 178,429,784 99.36% 100.00% 99.36% 177,287.833 2035 133,414,824 133,414,824 100.00% 100.00% 100.00% 133,414,824 2038 76,766,800 76,766,800 100.00% 100.00% 100.00% 76,768,800 2037 13,473,235 13,473,235 100.00% 100.00% 100.00% 13,473,235 RFNAW: W-EXCRMCWO VAFSR02EXH[WT 2tloo5

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT THREE 120%

100%

80%

• 0

'a C

60% * - -- 2004 Funding Status IL.

S Amount Percent Actual 80.414 34.95%

40% -Committed 94,719 41.17%

Floor 75,776 32.94%

20%

sjhjj Xiijjl-lll- ________

0%

1 1 1 2 2 2 2 2 2 2 2 2 9 9 9 0 0 0 0 0 0 0 0 0 9 9 9 0 0 1 1 1 2 2 3 3 I 5 9 3 7 1 5 9 3 7 1 5

---

Funding Curve -h- Funding Floor

• Actual Funding I

• ARIZONA PUBLIC SERVICE COMPANY NUCLEAR OECOMMISSIONING FUNDING REQUIREMENT ALL UNITS Based on 2001 Cost Sbdy.

Reat of Reiu 6.7500% Aal Period Raetof Retun 1.0875% Quaeter Period Rate of Retun 5.0000% AmvuA Escolkon Frd Quarter Send Quarter Thrd Quarter Fourth Quester Conbb Conbbit Cordt Canrbb Qartbo Ewrq Quan er Esn*m Oubri Em~ Ouarbr Ewrv Yewr oe n*t ~ l Cnb EsConbibi .EE Contrb EW B bDow t

ANNUAL CONTRIBS 2003 2004 2005 4,069,548 4.260.024 252,445.857 280.775.429 4.069.548 4.400,585 269,245,563 4.069.548 4,543.519 277,650,630 4,069,546 4,U8,864 286,617,043 2006 4,069.548 4,83s.663 295.523.2u4 18,278,193 4.069,548 4,986,955 304,579,757 4,069,548 5,139,783 313,789,089 4,069,548 5,295,191 323,153,828 2007 4,069,548 5.453.221 332.876,597 16,278,193 4,069.548 5.813,918 342,36Q,003 4,069,50 5,777,326 352,206,937 4,069.546 5,943,492 362,219,978 2008 4,069,540 6.112.482 18,278,193 372,401.988 4,069,548 8,284,284 382,755,820 4,09,u548 8.459.004 393,264.373 4,069,548 6,636,674 403,990,595 2009 4.069,548 6.017.341 414,877.465 16,278,193 4.069,548 7,001,058 425,948,091 4,089,548 7,187,874 437.205,513 4,069.548 7.377.643 448,652,905 2010 4,069.548 7,571,018 4e0293.471 4,069,548 18,278,193 7.767,452 472.130.472 4,069,548 7,967,202 484,187,222 4,09.u548 8,170,322 496,407,092 18,278,193 2011 4.069.548 8,37,870 W08.853,510 4,069,546 8,586,903 521,509,961 4.089,548 8.800.481 534,379,990 4,069,548 9,017,682 547,487, 16,278,193 2012 4,069,548 9,236.809 560.775,258 4.069.548 9,463,062 574,307,869 4,069.546 9,891,448 588,068,863 4,069.548 9,923,682 602.062,094 16,278,193 2013 4.069,548 10,189.798 616,291,440 4.069.548 10,399,918 830,780,906 4,069.,5S 10,644,0W9 645,474.545 4.06,9546 10,892,383 66,434,476 18,278.193 2014 4.069,u5 11,144.866 675,650.890 4,069.548 11,401,609 891,122,047 4.089,548 11,862,565 706,s54,280 4,09,u548 11.928,188 722,851,995 18,278,193 2015 4.0s,9548 12.198,127 739.119.870 4,069,548 12.472,844 755,881,863 4.069.548 12,751,794 772.483,206 4,069.546 13,035,654 789,588,408 16,278,193 2016 4,089.548 13,324.304 606,982.261 4,069,548 13,617,828 824,s69.635 4.089,548 13,918.300 842,855,483 4,069.547 14,219,811 860,944,642 16,278,192 2017 4.089.546 14,528,444 879,542.834 4,069.546 14.842.285 898,454.u6 4,069,548 15.161.423 917,565,839 4,069.548 15,485,945 937,241,133 16,278,193 2018 4.089.548 15,815,944 957.126.625 4,069.548 18.151.512 977,347.85 4,069,548 16,492,742 997,909,976 2019 4,069.5u4 16,839,731 1,018,819,255 18,278.193 4.089,548 17.192.575 1.040,081.378 4.069.546 17.551,373 1,061,702,300 4,069.548 17,916,226 1.083,688.074 18,287,238 4.067.447 1,106,042,758 16,278.193 2020 4,069,548 18,664.472 1.128,778,778 4.069,548 19.048,108 1,151,894,435 4,069.s40 19.430,219 1,175,402,201 3,726.143 19,834,912 1,1,983,257 18,278,193 2021 4,0698s48 20,232,505 1.223,265,310 4,069.548 20,642,602 1,247,977,461 4,069.548 21,059,820 1.273,106.829 3,709,745 21,483,674 1,29,300,048 16,278.193 2022 4,069.548 21,906,813 1.324,278.410 4,069,548 22,347,198 1,350,695.157 4.069,545 22,792,981 1.377,557,686 3,687,434 23,24,268 1.404,471.405 18.278.193 2023 4,069,548 U 23,700.455 1.432,241,409 4.069.546 24,189,074 1,460,480.031 4,069,548 24.645,601 1.489,195.1w0 (1.060,941) 25,130,169 1.513,2U64408 18,278,193 2024 4,069,548 25,530.337 1.542.870.293 4.0s.u548 26.035,936 1,572.975,778 4,069.548 28,543,966 1,603,589.292 2025 2.742,868 18,665,374 (1,556,113) 27.060,5s9 1,829.093,748 16,278,193 1.650.501,988 2.742,s66 19,028.638 1,872,271.492 2,742.60 19.393,9N 1,694,408,356 (104,38077m3) 55,069,891 2026 1,432,921 9,651,888 1.656,212,260 1,045,127A473 10,971.464 1,432,921 9,838,922 1.67,4u4.103 1,432,921 10,029,134 1,678,946,158 (272,056226) 62,81,197 2027 0 0 0 1,489,551,129 5,731,684 0 0 0 0 0 0 (251.854.441) 100,544,701 1,338,241.390 2028 0 0 0 0 0 0 0 0 0 0 (273,839,496) 90,331,294 1.154,933,188 0 2029 0 0 0 0 0 0 0 0 0 (290.447,147) 77.957,990 942,444.031 2030 0 0 0 0 0 0 0 0 0 (223,380,488) 63.614,972 782,678,535 0 2031 0 0 0 0 0 0 0 0 0 (148,414,403) 2032 52,830,801 667,094,933 0 0 0 00 0 0 0 0 0 0 (115,465,314) 0 2033 32.663.60 604,293225 0 0 0 0 0 0 0 0 0 0 (97.072.950) 2034 0 28,210,204 535,430.478 0 0 0 0 0 0 0 0 (162.301.015) 2035 00 11,955,879 385,085.342 0 0 0 0 0 *0 0 0 (152.860,196) 0 2036 0 0 232,225.148 0 0 0 0 0 .0 0 0 (191,805,440) 2037 0 0 0 40,419,706 0 0 0 0 0 0 0 (40,419,706) 0 (0)

PLEAMUO WSA5OLCCLWNO010018f

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT ALL UNITS ESTIMATED ANNUAL COSTS nu I-T." f PV. acc' PVbal 1-v4. 2 3 4 a a 1 II 'a Is 14 14 I 4t IT 17 at 672 12186 144220 320121201 ?lp2o1. 61286.4 34.326.186 lud4".67 1 2210. '.741-N WM27AN2 32.43I.SIS 24.772,48 4.070.702 amu I17 10266 142386 101*02 24A.86108 44861220 6144.44 316W7233 Slick604 321511.44 am M6 1864 la,= ratio0 asoo,867 21186861 21620.44 22.44144 2WSl 1.0"1 10.310 1"10. U7147 2.1310.28 11441444i 2644.44t asass86 4164104 40.263,472 2o4 I.m6 Wm.4 110.441 2.131,24 4124166 7.327.7O6 14107.810 21864.407 24.702,44 244 1.114 171.07 106213 32221410 42.26044 1111.1201111 "Okay2 41,0.6*70 37.821.121 443132.453 60S.86147 1.170 112.110 41.1794112 IS1.720 10.424 12286020 44.486016 27*6M.4 1.444418 47*27*1 W11.,4121 S02.,130,41 aM M2.4 4 un2 191.221 121611 41724.44 2&44*11 46022347 1.286 210.76 210.200 2.86786 86086*23 2471.443 0121,374.7 786,c62.48 lft.261441 t".4al osis41714 31021107 41.6*014 1,864.441 2016 1.364 211021 21641.041 51*511kfl7 32110 111,277 217 31.024.10 41.611F2 1.023 221.28 34.7117*27 sumoss8 71.721,702 41114.3711 2012 1,44 2312.4 211.022 241860 M2.22144 41,20.44o 110614488 1178686 7W,334,314 24.602.64 21402'86 14101741142 1,6$k*64. 4.286 244.861 286*6 %1.3614 07,1101441 "212t," Z41741867 07.6*18 4.57.11.7141 221706 2.4"A6I 12112144 1.86 27210 W461430 4186301360 102,331.1 2010 *."ki67 602144t~3 214.11*1 02.247171 fi3s24,16 1.726 221770 00.74223 104.4114 14.40AU2 2611.86 61.2301265 64224.023 1.20718 86*62*10 41323*14 30.*1KM1 38186.4 11126144 113.2AM"14 71,3*66 07.4n.434 "mm 1.4070686 1GL10.646 21T 1.615 1477*1 71.40123 224.621774227,41786 I1.21,02.201.14 twoo4*13 24,44.44 4711.814411 1.026.202 2120644l I.I IL3*0102 70.1864w 611a.86 216744~

2."f1 124,6*44 74.201*6 20.612 347.263 -."&140 23*14,1121 22,26.4 41286004 10.374.610 073 24.8 7l44.44 343.406 302670) 4.m1.677 41672864 41610,68 204,861*112 I27.6444 41106.4 SAM8 $1.47*60 01*11.861 w"7184so2 ml 260*0 4mml 4,22144 61141201 214.260,4 01116.113*8 4211.84.4 6*11 1860386W 121237.186 So,86386 81071.44 211.7XISS 4116232 4.46200 22168661 4711.73213 14.220 02.011.02 A4181200 0.1218 4486110 3102621.6 8622104 1L471.767 170.Nuo I1.6*17.43R4 21., *4,6 11114,764AM 9t.137*66 14186.710 Ml 17.6400 U&.31.86 4,"4.6a0 3at60.710 12170442 18686251 320.20"11

• 14418626 1W.863,4 2486 421 li.0631744 46.74.1186 02el.74766 2 13.1 170.2.8651 273.4611

• 1227.301*864 271.6147 60.6*44.2 122?4.106 41867.02 4114.0077 1617ll02 221.864.73 70.02.726 112,964.447 177027210 10.37,e10 4128.44~

220.SKS14 72.32.02 7 *7412.341 6*0211t023 1X2011662 121et.11*1* 182.44~d

.u 2: 0 I 1.21.2110 21.702.203 416*086 362

• W102.601 10411864,44 14.442.0711 7110.10 2401.402* 212*21866 t1d.914J31 186,414.48 7 1oz^000 MO8214444 02.614.72 K20,7.44 11.64,11016 141201710 II&O6*2

• 671 l4626 O4144.4 14721144n 232 W02.0728 5 10220*8 1311.I8.To6 KAMM.4 10402.20 B7.774.M0 30.6018 12186144 4 0160.86 1431.21011 U&MR1.12 I1&SO2wm 34.77144 101.M&44 24.M4)12 4117670 -07 *.,416.72 I.771012.1411. .7.I16 2.2411.104.9

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT ALL UNITS Based on iW I Cost StudyI Rate of Return .7500%l lEsclton F scoooox Funding Curve Funding Floor Actual Funding I Yeer Fund S Est. Cost  % Funded  % Band % Fbor S Fbor S In Fund Eat. Cost  % Fwtddl 1991 23,954,557 6.47%

l 370,450,982 19,163,629

. _ A _

80% 6.68%

_A 5.17%

= A 24,744,180 370,450,982

^ . _ j .

1992 32,291,558 388.963.531 8.30% 80% 6.64% 25,833,244 32,411,009 388,963.531 8.33%

1993 47.350,399 408,422,206 11.59% 80% 9.27% 37,880,319 43,378,398 406,422,208 10.62%

1994 63,451,735 428,843,317 14.60% 80% 11.84% 50,781,389 53,460,728 428,843,317 12A7%

1995 0,667,731 450,285.4s4 17.91% 80% 14.33% 84,534,186 73.899.985 450.285,484 16.37%

1996 92.446,522 441.921,684 20.92% 60% 18.74% 73.957,218 90,981,013 441.921.884 20.59%

1997 110.817.863 464.017.979 23.88% 60% 49.11% 88.654,290 118.001,259 464,017,979 25.00%

1998 130.438,989 487,218,877 28.77% 80% 21.42% 104,351,191 143,981,975 467,218.877 29.55%

199 160,687,664 542,542.127 29.62% 80% 23.e9% 128,550,291 171,08,062 542,542,127 31.53%

2000 184,510,511 569,669,233 32.39% 80% 25.91% 147,608,409 182,205.845 5s9,6s9,233 31.98%

2001 209,957.2e6 598,152.695 .35.10% 80% 28.08% 167,ss5.630 190,688.572 598.152.895 31.88%

2002 227,671,280 802,598.238 37.78% 80% 30.23% 182.137,024 195.104,188 602,s59,23a 32.38%

2003 255,608,816 632.726,050 40.40% 80% 32.32% 204e488,893 228.012,228 632,726.050 38.04%

2004 285,481.755 ee4,382,352 42.97% 80% 34.38% 228385,404 252.445,857 884,362,352 38.00%

2005 317,428.525 897,5s0.470 45.50% 80% 30.55% 254,976.311 2006 351,S0.985 732.459,493 48.00% 81% 38.88% 284,781,853 2007 388,130,883 789,082,468 50.47% 82% 4138% 318,245s212 2008 427.211.135 807,536,592 52.90% 83% 43.91% 354.581,180 2009 488.948,229 847,913,421 55.31% 84% 46.45% 393.890,181 2010 513,612,943 890,309,092 57.69% 85% 49.03% 438,542,295 2011 581.3236683 934,824,547 80.05% se% 51.84% 482.706,8se 2012 612.358.661 981.5e,774 62.39% 87% 54.27% s32.717,639 2013 688,955,578 1,030,644,3 64.71% 88% 58.94% 586,883,421 2014 725,335,597 1,082,176,28 67.03% 89% 59.85% u45.508,291 2015 787,698,322 1.138,285.079 69.32% 90% 62.39% 706.884.682 2016 854.446,718 1,193,099,333 71.62% 91% 65.17% 777,498,675 2017 925,732,046 1,252,754.300 73.90% 92% 67.98% 851,821,800 2018 1,002,051,525 1.315.392.015 76.18% 93% 70.84% 931,852,077 2019 1.83601.687 1,381,161,816 78.46% 94% 73.74% 1.018,524,898 2020 1,170.795,620 1.450,217.490 80.73% 95% 78.69% 1,112.190.434 2021 1.263,741,298 1,522,387,790 83.01% 96% 79.69% 1,213,118,076 2022 1,363.038,042 1,598,108,380 85.29% 97% 82.73% 1,322,083,786 2023 1.469.229.607 1,877,591,585 87.58% 98% 85.82% 1,439,751,882 2024 1,577.918,423 1.750.084.151 09.85% 99% 88.95% 1,581,987,735 2025 1.688680,005 1,837,981,413 91.88% 100% 91.57% 1.883,020,937 2026 1,699,231,949 1,817.432.163 93.50% 100% 93.50% 1.699,231.949 2027 1.533.534.785 1,621,140,167 94.60% 100% 94.60% 1.533,534,785 2028 1,376,475,110 1.437.750.013 95.74% 100% 95.74% 1,376.475,110 2029 1.183.037,714 1,222,310,042 96.79% 100% 96.79% 1,183,037,714 2030 955,944,470 978.482,341 97.70% 100% 97.70% 955.944,470 2031 780,427,43 792.835,9e8 98-43% 100% 98A3% 780,427.843 2032 669,729.795 076.842,641 98.90% 100% 98.ss% 869,729,795 2033 588,4s0,266 589,238,193 99.53% 100% 99.53% 56,4o0,268 2034 515,629,454 516.771.404 99.78% 100% 9.78s 515,629.454 2035 372,193,909 372,193,909 100.00% 100% 100.00% 372,193,909 2038 230.300,399 230.300.399 100.00% 100% 100.00% 230,300,399 2037 40.419,706 40.419.70e 100.00% 100% 100.00% 40,419,706 nRE5:0i W arari

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT AULUNITS 120%

100%

80%

a)

V 60%

U- 2004 Funding Status 40% Actual 252,440 38.00%

Committed 285,482 42.97%

Floow 228,385 34.38%

20%

0%

I 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 9 9 9 0 0 0 0 0 0 0 0 0 0 0 0 0 9 9 9 0 0 0 0 1 I I 2 2 2 3 3 3

.I 4 7 0 a 6 9 2 5 8 1 4 7 0 3 6 Yeac I -+-- Fundting Curve -*x Funding Floor

• Actual Fundi~ngl FL1D0A WEUCfELA CONINAM M l41 by. wr~"am

Palo Verde Nuclear Generating Station Appendix B, Tab 2 Units 1, 2, & 3 SRP 2004 Annual Funding Status Report Section 2.1.7 [Restated]

Summary of Assumptions Investment Return Assumption: 7.65%

Inflation/Escalation Assumption: 5.92%

2001 Cost Study

SALT RIVER PROJECT NUCLEAR DECOMMISSIONING TRUST (000's)

ALL UNITS SRP Share 17.49%

Aggregate Decom Costs in 2001$ 51.972.170 SRP Shore in 2001$ $344,933 Projected return on investments 7.65%

Ending Balance as of 12/31/01 in 2001$ $120,840 Projected Inflation 5.92%

FVof Total Decom. Charges Discounted to Start of Decom $1,402,556 Years To Start of Decom (Funding Yrs Left)

FV of 12/31/01 Fund Balance value at Start of Decom S413.513 Unit 1 Unit 2 Unit 3 FV of Balance Owed to be Funded by Contributions and Earnings 1989043 20 21 23 Current Balance Year(s) Calender Annual Before Decom Termination Since Year End Payment Earnings Decom Charges Ending Costs Funded Stuv 31 -Dec fInfla1Ad.l1 fInflat Adi.] Charoes (Inflat Adi. Balance inflat Adi.1 Ratio 1987 721 26 747 0.00 747 1988 2.880 31 3.658 0.00 3,658 1989 2.415 283 6,356 0.00 6,356 132,884 4.78%

1990 2.523 1.185 10.064 0.00 10,064 137,004 7.35%

1991 5,809 716 16.589 0.00 16.589 145,115 11.43%

1992 3.989 1,269 21.857 0.00 21,857 240.921 9.07%

1993 5.390 899 28,147 0.00 28,147 255.184 11.03%

A 1994 6,890 198 35,234 0.00 35.234 270.291 13.04%

C 1995 5,210 9,579 50.024 0.00 50.024 286,292 17.47%

T U

1996 4.188 7,961 62,172 0.00 62,172 303,241 20.50%

A L 1997 4,435 14.228 80.834 0.00 80.834 321,193 25.17%

1998 4.698 15,598 101,132 0.00 101,132 340,207 29.73%

1999 4,135 14.468 119.735 0.00 119,735 360,347 33.23%

2000 4,044 (3.007) 120,772 0.00 120,772 381,680 31.64%

0 2001 4,909 (4.841) 120,840 0.00 120,840 344,933 35.03%

2002 1,000 -11.184 110,656 0.00 110,656 365.353 30.29%

2 2003 6,812 19.514 136,982 0.00 136,982 386,981 35.40%.

3 2004 6.584 10,102 153.668 0.00 153,668 409.891 37.49%

4 2005 6,996 11.756 172.419 0.00 172,419 434,156 39.71%

5 2006 7,410 13,190 193,020 0.00 193,020 459.858 41.97%

6 2007 7.849 14.766 215.634 0.00 215,634 487.082 44.27%

7 2008 8.313 16,496 240,444 0.00 240.444 515,917 46.61%

8 2009 8.805 18,394 267.643 0.00 267.643 546.459 48.98%

9 2010 9,327 20,475 297,445 0.00 297,445 578.810 51.39%

20 2011 9.879 22,755 330.078 0.00 330,078 613.075 53.84%

I2 2012 10.464 25.251 365,793 0.00 365,793 649.369 56.33%

12 2013 11.083 27,983 404.859 0.00 404,859 687.8 12 58.86%

13 2014 11,739 30,972 447,570 0.00 447.570 728,531 61.43%

14 2015 12.434 34,239 494.244 0.00 494,244 771.660 64.05%

36 2016 13.170 37,810 545.224 0.00 545,224 817,342 66.71%

16 2017 13.950 41,710 600.883 0.00 600,883 865.728 69.41%

17 2018 14.776 45.968 661.627 0.00 661,627 916,980 72.15%

IF 18 2019 15,651 50,614 727.892 1.48 727,891 971,265 74.94%

0 R 19 2020 16.577 55,684 800,153 243.61 799,909 1,028,764 77.75%

E 20 2021 17.559 61,193 878,905 257.48 878,647 1,089,666 80.63%

C 21 18,598 67,217 964,719 290.27 964,429 1,154,175 83.567%

2022 A 1,222,502 86.25%

22 2023 19.699 73,779 1,058,197 3,736.00 1,054.461 S

23 2024 20.865 80.666 1,155,993 4,099 1,151.893 1,290,775 89.24%

T 24 2025 15.152 88,120 1,255,165 61.784 1,193,381 1,305,404 91.42%

25 2026 7.425 91,294 1.292,100 167.845 1,124.255 1,214,839 92.54%

26 2027 7.865 86,005 1.218,125 193.650 1,024,474 1,093,107 93.72%

27 2028 0.00 78,372 1,102.847 227,341 875.506 930,478 94.09%

28 2029 0.00 66,976 942.482 224,915 717,567 760,648 94.34%

29 2030 0.00 54,894 772.461 181,492 590,970 624.187 94.68%

30 2031 0.00 45,209 636,179 125,205 510,974 535.934 95.34%

31 2032 0.00 39.090 550,064 94,277 455.786 473,384 96.28%

32 2033 0.00 34,868 490,654 80.006 410.648 421.402 97.45%

33 2034 0.00 31,415 442.063 105.023 337,040 341,326 98.74%

34 2035 0.00 25,784 362.823 251,263 108,105 110,269 98.04%

35 2036 0.00 8,270 116,375 52.148 64,227 64.649 99.35%

36 2037 000 14.1 69.140 68.477 Q 0Q 100.00%

362.2i 1AJ 483150 i4536 837 55

FUNDING FLOOR ANALYSIS FOR ALL UNITS ($000's)

ESTIMATED FUNDING FUNDING FLOOR CURVE Ending Fund 92 Required Minimum Minimum Minimum Floor Y Balance Est. Costs % Funded  % Funded Band Percentoae S AMT Percentoae SAMT Satisfied?

1991 16.642 145.115 11.47% 80.00% 9.17% 13,314 11.43% 16.589 YES 1992 21,851 240,921 9.07% 9.07% 80.00% 7.25% 17,478 9.07% 21.857 YES 1993 28.157 255,184 11.05% 11.04% 80.00% 8.83% 22,530 11.03% 28,147 YES 1994 35.235 270.291 13.04% 13.04% 80.00% 10.43% 28.188 13.04% 35.234 YES 1995 43,140 286.292 15.07% 15.07% 80.00% 12.05% 34.512 17.47% 50.024 YES 1996 62.172 303.241 20.50% 17.13% 80.00% 13.71% 41,567 20.50% 62,172 YES 1997 80,834 321,193 25.17% 19.23% 80.00% 15.39% 49,423 25.17% 80.834 YES 1998 101,132 340.207 29.73% 21.37% 80.00% 17.09% 58.156 29.73% 101,132 YES 1999 119.735 360.347 33.23% 23.54% 80.00% 18.83% 67.851 33.23% 119,735 YES 2000 120,772 381.680 31.64% 25.74% 80.00% 20.59% 78.598 31.64% 120,772 YES 2001 120,840 344.933 35.03% 27.96% 80.00% 22.36% 77.141 35.03% 120,840 YES 2002 110,656 365.353 30.29% 30.23% 80.00% 24.18% 88.358 30.29% 110.656 YES 2 2003 136.982 386,981 35.40% 32.54% 80.00% 26.03% 100.748 35.40% 136.982 YES 3 2004 153,668 409,891 34.90% 34.89% 80.00% 27.91% 114,420 37.49% 153,668 YES 4 2005 172.419 434,156 37.29% 37.28% 80.00% 29.83% 129,490 39.71% 172.419 YES 5 2006 193,020 459,858 39.72% 39.71% 80.00% 31.77% 146,087 6 2007 215,634 487,082 42.19% 42.18% 80.00% 33.74% 164.350 12 7 2008 240.444 515,917 44.70% 44.69% 81.00% 36.19% 186,736 8 2009 267,643 546.459 47.25% 47.23% 82.00% 38.73% 211.653 9 2010 297.445 578,810 49.83% 49.82% 83.00% 41.35% 239,361 10 2011 330,078 613,075 52.48% 52.46% 84.00% 44.06% 270,143 2012 365,793 649,369 55.15% 55.13% 85.00% 46.86% 304,310 12 2013 404,859 687.812 57.86% 57.85% 86.00% 49.75% 342.203 13 2014 447,570 728,531 60.63% 60.62% 87.00% 52.74% 384,193 14 2015 494.244 771,660 63.45% 63.42% 88.00% 55.81% 430.688 15 2016 545.224 817.342 66.29% 66.28% 89.00% 58.99% 482.135 211 16 2017 600,883 865.728 69.19% 69.18% 90.00% 62.26% 539.022 17 2018 661,627 916,980 72.14% 72.13% 91.00% 65.64% 601.882 18 2019 727,891 971,265 75.14% 75.13% 92.00% 69.12% 671,298 19 2020 799,909 1,028,764 78.19% 78.17% 93.00% 72.70% 747.909 20 2021 878.647 1,089,666 81.28% 81.27% 94.00% 76.39% 832.411 21 2022 964,429 1,154,175 84.42% 84.41% 95.00% 80.19% 925.567 22 2023 1,054,461 1,222,502 87.62% 87.60% 96.00% 84.10% 1,028,125 23 2024 1,151,893 1.290.775 90.83% 90.82% 97.00% 88.10% 1,137,164 24 2025 1,193,381 1,305,404 92.12% 92.11% 98.00% 90.27% 1,178.415 25 2026 1,124.255 1.214.839 93.20% 93.16% 99.00% 92.23% 1,120,413 26 2027 1,024,474 1,093,107 94.30% 94.26% 100.00% 94.26% 1,030.414 27 2028 875.506 930,478 95.28% 95.26% 100.00% 95.26% 886,380 28 2029 717,567 760,648 96.15% 96.14% 100.00% 96.14% 731,307 29 2030 590,970 624,187 96.84% 96.83% 100.00% 96.83% 604.418 30 2031 510.974 535,934 97.78% 97.76% 100.00% 97.76% 523.955 31 2032 455.786 473,384 98.34% 98.33% 100.00% 98.33% 465.456 32 2033 410.648 421,402 99.06% 99.05% 100.00% 99.05% 417,412 33 2034 337,040 341,326 99.31% 99.30% 100.00% 99.30% 338.928 34 2035 108,105 110.269 100.00% 100.00% 100.00% 100.00% 110.269 35 2036 64.227 64.649 100.00% 100.00% 100.00% 100.00% 64.649 36 2037 0.00 0.00 100.00% 100.00%y 100.00% 100.00% 0.00

_t) 0 0 n

- AH S 5~ _

---

I l I 1991 1 I ll

1992-l kl 1993 l

1994 1.""S 1995 +  ! 11 119967 19974- I I

\-----

1998 1999 -

2 00 0 j+ It.

2001 +/- io  : 1. '5 Ol 2002 4 I 2003 t II

' 0

.I l

2004 - II

.I

.4I. '

2005 I I.

II 20061 I II 2007+

I 2008 - I.

I I

2009 +- I I

2010 I I

I 2011 - I

I I

2012 I I I. ,

I 2013 +/-

I I II 2014+/-

I 2015 - I I

I 20164 i I

.4 I-I

\ I I . .

12017 I I I I

. I J218 II I I

I I .4  :

2019 I I I i . I 2020 T II II 4 2021 + I I I

I I I

I i*I I

12022 I I i

,2023 t I I

I I

I 2024- I I I

I  ; I 2025 I I I 2026 t I I

I I

I I 4

2027 t I I I I 2028 II I II II 2029 i I I 0CM 2030+ I D5 I

I I I

!2031+

Ig 3-ia CL I I 2032 + I I p

I 2033 -

I 2034+

2035 A-2036 +

12037-

SALTRIVER PROJECT NUCLEAR DECOMMISSIONING TRUST I UNIT11 AR Participants Decom Costs in 2001$ $615,841 SRP Share 17.49%

SRP Share in 2001$ $107,711 Projected return on investments 7.65%

Plan Balance as of 12/31101 in 2001$ $40,624 Projected Inflation 5.92%Y Years To Start of Decom (Funding Yrs Left) 20 FV of TotalDecom. Charges Discounted to 2024 $403,976 FV of 12/31/01 Plan Balance in 20 years S128.334 FV of Balance Owed to be Funded by Contributions and Eamings 1275642 Current Balance Calender Annual Before Decom Termination Payment Earnings Decom Charges Ending Costs Funded Years Since Year End (Inflat Adi.l fInflat Adi.l Charges lfnflat Adi l Balgnce llnflat Adi.I Ratio Studv 3 1 Dec 1987 721 26 747 0.00 747 1988 960 31 1,738 0.00 1,738 805 135 2,678 0.00 2.678 43,630 6.14%

1989 1990 841 499 4,018 0.00 4.018 44,983 8.93%

1.746 280 6.044 0.00 6.044 47.646 12.68%

1991 1992 1,107 462 7,617 0.00 7.617 79.718 9.56%

1993 1842 313 9,772 0.00 9,772 84.438 11.57%

A 2,360 69 12.201 0.00 12.201 89.436 13.64%

1994 C 1,775 3.317 17,292 0.00 17,292 94,731 18.25%

1995 T

UJ 21.336 0.00 21.336 100.339 21.26%7 1996 1,292 2,752 A

1.369 4.881 27,586 0.00 27,586 106.279 25.96%

L 1997 1.450 5,318 34,354 0.00 34,354 112,571 30.52%

1998 1,267 4,915 40.536 0.00 40,536 119.235 34.00%

1999 1,223 (1,0191 40.740 0.00 40,740 126.294 32.26%

2000 1,517 11.633) 40,624 0.00 40,624 107,711 37.72%

0 2001 2002 309 (3.7591 37,174 0.00 37.174 114.087 32.58%

2,163 6,551 45.888 0.00 45,888 120.841 37.97%

2 2003 2.069 3.381 51.338 0.00 51,338 127.995 40.11%

1 3 2004 2.199 3.927 57,465 0.00 57,465 135.572 42.39%

2 4 2005 2,330 4,396 64.191 0.00 64,191 143.598 44.70%

3 5 2006 2,468 4.911 71,569 0.00 71,569 152,099 47.05%

4 6 2007 2.614 5.475 79,657 0.00 79.657 161.103 49.44%

5 7 2008 2,768 6.094 88.519 0.00 88,519 170,641 51.87%

6 8 2009 2,932 6,772 98.223 0.00 98,223 180.742 54.34%

7 9 2010 3,106 7.514 108.843 0.00 108.843 191,442 56.85%

8 10 2011 3,290 8,327 120.460 0.00 120.460 202.776 59.41%

9 11 2012 3,484 9.215 133.159 0.00 133.159 214,780 62.00%

10 12 2013 3,691 10,187 147,037 0.00 147,037 227.495 64.63%

11 13 2014 3.909 11.248 162,194 0.00 162,194 240,963 67.31%

12 14 2015 4.141 12.408 178.743 0.00 178,743 255.228 70.03%

13 15 2016 4,386 13,674 196.802 0.00 196,802 270.337 72.80%

14 16 2017 F 4.645 15,055 216.503 0.00 216,503 286.341 75.61%

15 17 2018 0 303,293 78.47%

16 18 2019 4,920 16,562 237.986 1 237,985 R

5,212 18.206 261.404 244 261,160 321.248 81.30%

E 17 19 2020 C 2021 5,520 19,979 286.903 257 286,645 340.265 84.24%

18 20 A 2022 5.847 21.928 314.678 290 314.388 360.409 87.23%

19 21 S 344.922 3,736 341,186 381.745 89.38%

20 22 2023 6,193 24,051 T

2024 6.560 26.101 373.846 4,066 369.781 400.279 92.38%

21 23 24 2025 0.00 28.288 398,069 42.291 355.777 381.684 93.21%

2026 0.00 27.217 382.994 74,504 308,490 329.775 93.55%

25 2027 0.00 23.599 332.090 61,997 270,092 287,301 94.01%

26 2028 0.00 20.662 290.754 65.135 225,619 239.174 94.33ff 27 2029 0.00 17.260 242.879 68,344 174.535 184,988 94.35%

28 2030 0.00 13.352 187.886 47,595 140,291 148.345 94.57%

29 2031 0.00 10.732 151.024 17,404 133,620 139.723 95.63%

30 2032 0.00 10.222 143,842 13,253 130.589 134,742 96.92%

31 2033 0.00 9.990 140.579 20.626 119.954 122.093 98.25%

32 2034 0.00 9,176 129.130 30.617 98,513 98,704 99.81%

33 2035 7.53 106.049 104.547 00 000 100.00%

34 000.

105 031 450 584 555 615 59%376 000 ^Q

FUNDING FLOOR ANALYSIS FOR UNIT 1 ($000's)

ESTIMATED FUNDING I FUNDING FLOOR CURVE Ending Fund 92 Required Minimum Minimrnum Minimum Floor Yeor Balance Est. Costs % Funded  % Funded Bond Percentage S AMT Percentag e SAMT Satisfied?

1991 6,071 47,646 12.74% 80.00% 10.19% 4.857 12.68% 6,044 YES 1992 7,617 79.718 9.56% 9.55% 80.00% 7.64% 6,090 9.56% 7,617 YES 1993 9,772 84.438 11.59% 11.58% 80.00% 9.26% 7.822 11.58% 9.772 YES 1994 12,201 89.436 13.64% 13.64% 80.00% 10.91% 9.761 13.64% 12,201 YES 1995 14,909 94,731 15.74% 15.74% 80.00% 12.59% 11,927 18.25% 17,292 YES 1996 21,336 100.339 21.26% 17.87% 80.00% 14.30% 14,344 21.26% 21,336 YES 1997 27.586 106.279 25.96% 20.03% 80.00% 16.03% 17,034 25.96% 27.586 YES 1998 34,354 112.571 30.52% 22.23% 80.00% 17.79% 20.024 30.52% 34,354 YES 1999 40.536 119.235 34.00% 24.47% 80.00% 19.58% 23.343 34.00% 40,536 YES 2000 40,740 126.294 32.26% 26.74% 80.00% 21.40% 27.022 32.26% 40,740 YES 2001 40,624 107.711 37.72% 29.06% 80.00% 23.24% 25.036 37.72% 40,624 YES 2002 37.174 114,087 32.58% 31.40% 80.00% 25.12% 28,662 32.58% 37,174 YES 2 2003 45.888 120,841 37.97% 33.79% 80.00% 27.03% 32,665 37.97% 45.888 YES 3 2004 51,338 127,995 40.11% 36.21% 80.00% 28.97% 37,083 40.11% 51.338 YES YES 31.33% 57.465 4 2005 57,465 135,572 42.39% 38.68% 81.00% 42,476 42.39%

5 2006 64.191 143.598 44.70% 41.19% 82.00% 33.77% 48.496 6 2007 71,569 152.099 47.05% 43.73% 83.00% 36.30% 55.207 7 2008 79.657 161,103 49.44% 46.32% 84.00% 38.91% 62.682 8 2009 88.519 170.641 51.87% 48.95% 85.00% 41.61% 70.998 9 2010 98.223 180.742 54.34% 51.62% 86.00% 44.40% 80.241 10 2011 108.843 191,442 56.85% 54.34% 87.00% 47.27% 90,504 11 2012 120,460 202.776 59.41% 57.10% 88.00% 50.25% 101.891 12 2013 133,159 214.780 62.00% 59.91% 89.00% 53.32% 114,513 13 2014 147,037 227.495 64.63% 62.76% 90.00% 56.48% 128,494 14 2015 162.194 240,963 67.31% 65.66% 91.00% 59.75% 143.969 15 2016 178,743 255.228 70.03% 68.60% 92.00% 63.11% 161.085 16 2017 196.802 270.337 72.80% 71.60% 93.00% 66.58% 180.003 17 2018 216,503 286,341 75.61% 74.64% 94.00% 70.16% 200.900 18 2019 237,985 303,293 77.74% 77.73% 95.00% 73.85% 223.967 19 2020 261,160 321,248 80.88% 80.87% 96.00% 77.64% 249.416 20 2021 286,645 340.265 84.08% 84.07% 97.00% 81.55% 277.477 21 2022 314,388 360,409 87.38% 87.32% 98.00% 85.57% 308.401 22 2023 341,186 381,745 90.62% 90.59% 99.00% 89.69% 342.377 23 2024 369,781 400.279 93.98% 93.93% 100.00% 93.93% 375.990 24 2025 355,777 381,684 95.20% 95.17% 100.00% 95.17% 363.257 25 2026 308.490 329.775 95.95% 95.91% 100.00% 95.91% 316.288 26 2027 270.092 287.301 96.68% 96.64% 100.00% 96.64% 277.643 27 2028 225.619 239.174 97.40% 97.33% 100.00% 97.33% 232,787 28 2029 174,535 184.988 97.89% 97.85% 100.00% 97.85% 181,011 29 2030 140.291 148.345 98.40% 98.38% 100.00% 98.38% 145.941 30 2031 133,620 139,723 100.00% 100.00% 100.00% 100.00% 139.723 31 2032 130,589 134,742 100.00% 100.00% 100.00% 100.00% 134.742 32 2033 119.954 122.093 100.00% 100.00% 100.00% 100.O% 122.093 33 2034 98,513 98.704 100.00% 100.00% 100.00% 100.00% 98.704 34 2035 0.00 0.00 100.00% 100.00% 100.00% 100.00% 0.00

0 6

0 0

I4_

at i-i-l-as as C II 0:

1996 T 1997-b 0' 0C f*

1998 \ CL0 0*

0:

1999 I 12000 T 5..

0 H 12001 I I _ _

12002-

• N 2003 t

. I 2004 - I

• I 2005 2006 2007 +

2008 +

22009 + 1.

12010 2011 2012 2013 I

12014 2015 2016 2017t

'20181-2019 2020I 2021 2022t 2023 2024 2025 Ii I

2

.~

2026 -

'2027 -~

j2028- a Cq L (

2029 +

2030+

2031 2032 t 2033 -

2034 -

2035 -

SALT RIVER PROJECT NUCLEAR DECOMMISSIONING TRUST I UNIT 2 All Participants Decom Costs In 2001$ $673,314.9 SRP Share 17.49%

SRP Share in 2001$ $117,762.8 Projected return on investments 7.65%

Plan Balance as of 12/311/Olin 2001$ $39,105.0 Projected Inflation 5.92%

Years To Start of Decom (Funding Yrs Left) 21 FV of Total Decom. Charges Discounted to 2025 $468,249.7 FV af 12/31/01 Plan Balance in 21 years S130.848.

FV of Balonce Owed to be Funded by Contdibutions and Eamings 1337A4L0 Current Balance Calender Annual Before Decom Termination Years Since Year End Payment Earnings Decom Charges Ending Costs Funded studv 31-Dec finflat Adi.l llnflat Adi.i Choraes llnflal Adi Balance llnflat Adi.l Ragti 1988 960 0.00 960 0.00 960 1989 805 74 1,839 0.00 1,839 43,256 4.25%

1990 841 343 3.023 0.00 3,023 44,597 6.78%

1991 1.909 218 5,150 0.00 5.150 47,237 10.90%

1992 1,292 394 6.839 0.00 6.839 78,467 8.72%

1993 1,761 281 8.881 0.00 8.881 83.112 10.69%

1994 2.241 63 11.185 0.00 11.185 88.032 12.71%

A 15,940 93.244 17.10%

1995 1,714 3.042 15.940 0.00 C

IJ 1.379 2.537 19856 0.00 19,856 98.764 20.10%

1996 A 1997 1,460 4.545 25,860 0.00 25.860 104,611 24.72%

L. I,546 4,991 32,398 0.00 32,398 110.804 29.24%'

1998 1999 1.452 4,635 38.485 0.00 38.485 117.363 32.79%

2000 1,430 (966) 38,949 0.00 38.949 124,311 31.33%

2001 1,717 (1.561) 39,105 0.00 39,105 117,763 33.21%

2002 350 (3.620) 35,835 0.00 35.835 124.734 28.73%

2003 2,487 6,329 44.651 0.00 44.651 132,119 33.80%

2004 2,427 3,299 50,377 0.00 50,377 139,940 36.00%

2005 2.577 3,854 56,808 0.00 56,808 148.224 38.33%

2006 2,730 4,346 63.884 0.00 63.884 156,999 40.69%

2007 2,892 4,887 71,663 0.00 71,663 166.294 43.09%

2008 3,063 5.482 80,208 0.00 80.208 176,138 45.54%

2009 3,244 6.136 89.588 0.00 89,588 186.566 48.02%

2010 3.436 6,853 99.877 0.00 99,877 197.610 50.54%

2011 3.640 7.641 111,158 0.00 111,158 209.309 53.11%

2012 3.855 8,504 123.516 0.00 123,516 221,700 55.71%

2013 4.083 9,449 137,048 0.00 137.048 234.825 58.36%

2014 4,325 10.484 151,857 0.00 151.857 248,726 61.05%

2015 4.581 11,617 168.056 0.00 168.056 263,451 63.79%

2016 4,852 12,856 185,764 0.00 185.764 279,047 66.57%

2017 5.139 14,211 205.114 0.00 205.114 295.567 69.40%

F 2018 5.444 15,691 226,249 0.00 226.249 313,064 72.27%

0 249,323 331,598 75.19%

2019 5.766 17,308 249.323 0.00 R

2020 6.107 19.073 274,504 0.00 274,504 351.228 78.16%

E C 2021 6,469 21,000 301,972 0.00 301,972 372.021 81.17%

A 2022 6,852 23,101 331,925 0.00 331.925 394.045 84.24%

£ 7,257 25.392 364.575 0.00 364.575 417,372 87.35%

2023 I

2024 7,687 27.890 400,152 33 400,119 442,047 90.51%

2025 8,142 30,609 438.870 19.493 419,377 448.723 93.46%

2026 0.00 32.082 451,459 93.341 358.118 381.947 93.76%

2027 0.00 27,396 385,514 72637 312,877 331.921 94.26%

2028 0.00 23.935 336,813 79.801 257.011 271,770 94.57%

2029 0.00 19,661 276,673 63.439 213.234 224.420 95.02%

2030 0.00 16.312 229,546 61.134 168.412 176.571 95.38%

2031 0.00 12.884 181.296 41,340 139,956 145.685 96.07%

2032 0.00 10.707 150.663 20.229 130,434 134,080 97.28%

2033 0.00 9,978 140,412 23.228 117,184 118.790 98.65%

2034 0.00 8,965 126,149 33.239 92.910 92.584 100.35%

2035 QUQ z48fl 100.01 0Q0Q 100.00%

12L7913 4t0a01 607,922 605 975 Qng QQQ

FUNDING FLOOR ANALYSIS FOR UNIT 2 ($000's)

ESTIMATED FUNDING FUNDING FLOOR CURVE i_

Ending Fund 92 Required Minimum Minimum Minimum Floor Year Balance Est. Costs % Funde  % Funded Bond Percentage S AMT 1Percentoge SAMT Satisfied?

1991 5,163 47,646 10.93% 80.00% 8.74% 4,166 10.81% 5.150 YES 1992 6.836 78.467 8.71% 8.71% 80.00% 6.97% 5.469 8.72% 6.839 YES 1993 8.887 83,112 10.69% 10.69% 80.00% 8.55% 7,109 10.69% 8.881 YES 1994 11,185 88.032 12.71% 12.71% 80.00% 10.16% 8.948 12.71% 11,185 YES 1995 13.755 93.244 14.75% 14.75% 80.00% 11.80% 11,004 17.10% 15,940 YES 1996 19.856 98,764 20.10% 16.83% 80.00% 13.46% 13.298 20.10% 19.856 YES 1997 25.860 104,611 24.72% 18.94% 80.00% 15.15% 15,853 24.72% 25,860 YES 1998 32.398 110.804 29.24% 21.09% 80.00% 16.87% 18,696 29.24% 32.398 YES 1999 38.485 117,363 32.79% 23.27% 80.00% 18.62% 21.852 32.79% 38.485 YES 2000 38.949 124,311 31.33% 25.49% 80.00% 20.39% 25,352 31.33% 38.949 YES 2001 39,105 117.763 33.21% 27.75% 80.00% 22.20% 26,140 33.21% 39,105 YES 2002 35.835 124.734 28.73% 30.04% 80.00% 24.03% 29.974 28.73% 35.835 YES 2 2003 44,651 132,119 32.38% 32.37% 80.00% 25.89% 34.210 33.80% 44.651 YES 3 2004 50,377 139,940 34.74% 34.73% 80.00% 27.79% 38.885 36.00% 50.377 YES 4 2005 56,808 148.224 37.15% 37.14% 80.00% 29.71% 44.040 38.33% 56.808 YES 5 2006 63.884 156.999 39.59% 39.58% 81.00% 32.06% 50.339 6 2007 71,663 166.294 42.08% 42.07% 82.00% 34.50% 57.366 7 2008 80.208 176.138 44.60% 44.59% 83.00% 37.01% 65.195 8 2009 89.588 186.566 47.18% 47.16% 84.00% 39.62% 73.909 9 2010 99.877 197,610 49.79% 49.77% 85.00% 42.30% 83,598 10 2011 111,158 209.309 52.45% 52.42% 86.00% 45.08% 94.360 21 2012 123,516 221,700 55.15% 55.12% 87.00% 47.95% 106,306 12 2013 137.048 234.825 57.86% 57.85% 88.00% 50.91% 119,552 13 2014 151.857 248.726 60.65% 60.64% 89.00% 53.97% 134.230 14 2015 168.056 263,451 63.49% 63.47% 90.00% 57.12% 150,480 15 2016 185.764 279.047 66.35% 66.34% 91.00% 60.37% 168.460 16 2017 205,114 295.567 69.28% 69.26% 92.00% 63.72% 188.339 17 2018 226.249 313.064 72.25% 72.23% 93.00% 67.18% 210,302 18 2019 249.323 331,598 75.26% 75.25% 94.00% 70.73% 234.554 19 2020 274,504 351,228 78.33% 78.32% 95.00% 74.40% 261.318 20 2021 301,972 372,021 81.44% 81.43% 96.00% 78.18% 290.835 21 2022 331,925 394,045 84.61% 84.60% 97.00% 82.06% 323.371 22 2023 364.575 417.372 87.89% 87.82% 98.00% 86.07% 359.217 23 2024 400,119 442,047 91.17% 91.07% 99.00% 90.16% 398.534 24 2025 419,377 448.723 93.46% 92.55% 100.00% 92.55% 415.299 25 2026 358.118 381,947 94.12% 94.02% 100.00% 94.02% 359,104 26 2027 312.877 331.921 95.30% 95.24% 100.00% 95.24% 316,124 27 2028 257,011 271,770 96.05% 96.00% 100.00% 96.009% 260.898 28 2029 213,234 224,420 96.75% 96.72% 100.00% 96.72% 217.068 29 2030 168,412 176.571 97.50% 97.40% 100.00% 97.40% 1711,987 30 2031 139,956 145,685 100.00% 97.86% 100.00% 97.86% 142,563 31 2032 130.434 134.080 100.00% 98.40% 100.00% 98.40% 131.929 32 2033 117,184 118.790 100.00% 100.00% 100.00% 100.00% 118.790 33 2034 92.910 92.584 100.00% 100.00% 100.00% 100.00% 92.584 34 2035 0.00 0.00 100.00% 100.00% 100.00% 100.00% 0.00

_____ -o o~~ -- --

! 1992 tr---a-19 93 1994 f 1995 +-

1996' OD 10 VII j1997' 1998 X 1999 - -

2000t '-,

2001~

20021,

2003+

2004 +

2005 {

2006 2007 2008 2009 -

2010-'

2011 -

2012-20 13 2014-2015 2016-f-2017 -

2018 t 2019 -,

2020 20223 -

N4 12024 h cm K3 2025+/-

20264-12027C 20281 -.

20291-2030t

!2031+

2032 2033 1 2034 .

20351

SALT RIVER PROJECT NUCLEAR DECOMMISSIONING TRUST UNIT 3 All Participants Decom Costs In 2001$ $683014.0 SRP Share 17.49%

SRP Share In 2001$ $119,459.1 Projected return on Investments 7.65%

Plan Balance as ot 12/31/01 In 2001$ $41.111.0 Projected Inflation 5.92%

Years To Start of Decom (Funding YrsLeft) 23 FV of Total Decom. Charges Discounted to 2027 $530,330.2 FV of 12/31/01 Plan Balance In 23 year S154.330.4 V oa Balance Owed to be Funded by Contributions and Earrings 3752999.9 Current Balance Calender Annual Before Decom Termination Years Since Year End Payment Earnings Decom Charges Ending Costs Funded tudv 31-Dec Ilnlat Adi. Infolt Ad.i) Charaes lintiZtAdi.6l Balonce ,Inlot Adl.l R11t2 1988 960 0.00 960 0.00 960 1989 805 74 1.839 0.00 1.839 45.998 4.0D%

1990 841 343 3.023 0.00 3,023 47.424 6.37%

1991 2,154 218 5.395 0.00 5.395 50,232 10.74%

1992 1,590 413 7.401 0.00 7,401 82.736 8.95%

1993 1,787 304 9.493 0.00 9.493 87.634 10.83%

A 1994 2,290 67 11.849 0.00 11.849 92.822 12.77%

C 1995 1.721 3.221 16.791 0.00 16.791 98.317 17.08%

T U 1996 1,517 2.672 20,980 0.00 20.980 104,138 20.15%

A 1997 1,606 4.802 27.388 0.00 27.388 110,303 24.83%

L 1998 1.702 5.289 34.380 0.00 34.380 116.833 29.43%

1999 1416 4,918 40,714 0.00 40.714 123,749 32.90%

2000 1,391 (1,022) 41,083 0.00 41.083 131.075 31.34%

0 2001 1.675 (1,647) 41.111 0.00 41.111 119,459 34.41%

1 2002 341 (3.805s 37.647 0.00 37.647 126,531 29.75%

2 2003 2162 6.634 46.443 0.00 46.443 134D22 34.65%

3 2004 2.088 3.422 51,953 0.00 51.953 141.956 36.60%

4 2005 2.219 3,974 58.146 0.00 58.146 150,360 38.67%

5 2006 2.350 4.448 64,945 0.00 64,945 159,261 40.78%

6 2007 2.490 4.968 72.403 0.00 72.403 168,689 42.92%

7 2008 2.637 5.539 80.579 0.00 80.579 178,676 45.10%

8 2009 2.793 6.164 89,536 0.00 89.536 189,253 47.31%

9 2010 2.958 6.850 99.344 0.00 99.344 200,457 49,56%

10 2011 3.134 7,600 110,077 0.00 110,077 212.324 51.84%

11 2D12 3.319 8.421 121,817 0.00 121.817 224.894 54.17%

12 2013 3,516 9,319 134.652 0.00 134,652 238.207 56.53%

13 2014 3.724 10.301 148.676 0.00 148,676 252.309 58.93%

14 2015 3.944 11.374 163,994 0.00 163,994 267.246 61.36%

15 2016 4.178 12.546 180.717 0.00 180,717 283D067 63.84%

16 2017 4.425 13.825 198,967 0.00 198.967 29.824 66.36%

F 17 2018 4.687 15.221 218.874 0.00 218.874 317,574 68.92%

O 18 2019 4.964 16,744 240.583 0.00 240.583 336.374 71.52%

R 19 2020 5,258 18,405 264.245 0.00 264.245 356.288 74.17%

E 20 2021 5.569 20,215 290,030 0.00 290,030 377.380 76,85%

C 21 2022 5.899 22.187 318,116 0.00 318.116 399.721 79.58%

A 22 2023 6.248 24.336 348,700 0.00 348.700 423.384 82.36%

S T 23 2024 6.618 26.676 381.994 0.00 381.994 448.449 85.18%

24 2025 7,010 29.223 418.227 0.00 418,227 474.997 88.05%

25 2026 7.425 31.994 457.646 0.00 457.646 503,117 90.96%

26 2027 7.865 35.010 500.521 59.016 441.505 473.885 93.17%

27 2028 0.00 33.775 475.280 82.405 392.875 419.535 93.65%

28 2029 0.00 30.055 422.930 93,131 329.799 351.240 93.90%

29 2030 0.00 25.230 355,029 72.763 282266 29.270 94.32%

30 2031 0.00 21.593 303.859 66.461 237.398 250.526 94.76%

31 2032 0.00 18.161 255.559 60.795 194,764 204,562 95.21%

32 2033 0.00 14.899 209.663 36.153 173.510 180.519 96.12%

33 2034 0.00 13.274 186,784 41,168 145.616 150.038 97.05%

34 2035 0.00 11.140 156,756 48.651 108,105 110.269 98.04%

35 2036 0.00 8.270 116.375 52.148 64.227 64.649 99.35%

36 2037 Q A1 69140 68.477 10.01 Q, 100.00%

129,275 5597551 A6PA A6R1164 L2 Q4m

FUNDING FLOOR ANALYSIS FOR UNIT 3 (5000's)

ESTIMATED FUNDING Ending Fund I FUNDING FLOOR CURVE 92 Required Minimum Minimum Minimum ii1 Floor Year Bolonce Est, Costs % Funded  % Funded Band Percentoge S AMT Percentage SAMT Satisfied?

1991 5.408 47,646 10.93% 80.00% 8.74% 4,166 11.32% 5.395 YES 1992 7.398 82.736 8.94% 8.94% 80.00% 7.15% 5.918 8.95% 7,401 YES 1993 9,498 87.634 10.84% 10.84% 80.00% 8.67% 7,598 10.83% 9,493 YES 1994 11,849 92.822 12.77% 12.77% 80.00% 10.21% 9,479 12.77% 11.849 YES 1995 14.477 98.317 14.72% 14.72% 80.00% 11.78% 11.581 17.08% 16.791 YES 1996 20,980 104,138 20.15% 16.72% 80.00% 13.37% 13.926 20.15% 20.980 YES 1997 27.388 110,303 24.83% 18.74% 80.00% 14.99% 16.535 24.83% 27.388 YES 1998 34.380 116,833 29.43% 20.80% 80.00% 16.64% 19.436 29.43% 34.380 YES 1999 40.714 123,749 32.90% 22.89% 80.00% 18.31% 22.656 32.90% 40,714 YES 2000 41,083 131,075 31.34% 25.01% 80.00% 20.01% 26.225 31.34% 41.083 YES 2001 41,111 119,459 34.41% 27.17% 80.00% 21.73% 25,964 34.41% 41,111 YES 2002 37.647 126,531 29.75% 29.36% 80.00% 23.49% 29.722 29.75% 37.647 YES 2 2003 46,443 134,022 34.65% 31.59% 80.00% 25.27% 33.873 34.65% 46.443 YES 3 2004 51,953 141,956 36.60% 33.86% 80.00% 27.09% 38.452 36.60% 51.953 YES 4 2005 58,146 150.360 36.19% 36.16% 80.00% 28.93% 43.499 38.67% 58.146 YES 5 2006 64.945 159,261 38.51% 38.50% 80.00% 30.80% 49,057 6 2007 72.403 168.689 40.89% 40.88% 80.00% 32.71% 55.172 7 2008 80.579 178.676 43.31% 43.30% 81.00% 35.07% 62.668 8 2009 89.536 189,253 45.77% 45.76% 82.00% 37.52% 71,011 9 2010 99,344 200.457 48.27% 48.26% 83.00% 40.05% 80.288 10 2011 110,077 212.324 50.80% 50.79% 84.00% 42.67% 90,594 21 2012 121.817 224.894 53.38% 53.37% 85.00% 45.37% 102,031 12 2013 134.652 238.207 56.01% 56.00% 86.00% 48.16% 114,715 13 2014 148.676 252.309 58.67% 58.66% 87.00% 51.04% 128,769 14 2015 163.994 267.246 61.38% 61.37% 88.00% 54.01% 144,329 15 2016 180.717 283.067 64.13% 64.12% 89.00% 57.07% 161,546 16 2017 198.967 299.824 66.95% 66.92% 90.00% 60.23% 180,581 17 2018 218,874 317,574 69.79% 69.76% 91.00% 63.49% 201,614 18 2019 240.583 336.374 72.69% 72.65% 92.00% 66.84% 224,840 19 2020 264.245 356.288 75.62% 75.59% 93.00% 70.30% 250.471 20 2021 290.030 377.380 78.60% 78.58% 94.00% 73.86% 278.740 21 2022 318,116 399,721 81.72% 81.61% 95.00% 77.53% 309,903 22 2023 348.700 423.384 84.72% 84.69% 96.00% 81.31% 344.237 23 2024 381,994 448.449 87.85% 87.81% 97.00% 85.18% 381,971 24 2025 418,227 474-997 89.30% 89.24% 98.00% 87.46% 415,431 25 2026 457.646 503,117 90.96% 90.70% 99.00% 89.80% 451,775 26 2027 441,505 473.885 93.17% 92.14% 100.00% 92.14% 436.647 27 2028 392.875 419,535 93.65% 93.60% 100.00% 93.60% 392.695 28 2029 329,799 351,240 94.89% 94.87% 100.00% 94.87% 333.229 29 2030 282.266 299.270 95.75% 95.73% 100.00% 95.73% 286,490 30 2031 237.398 250.526 100.00% 96.46% 100.00% 96.46% 241.669 31 2032 194,764 204,562 100.00% 97.18% 100.00% 97.18% 198,786 32 2033 173,510 180,519 100.00% 97.79% 100.00% 97.79% 176.529 33 2034 145,616 150.038 100.00% 98.40% 100.00% 98.40% 147,640 34 2035 108.105 110,269 100.00% 100.00% 100.00% 100.00% 110,269 35 2036 64.227 64.649 100.00% 100.00% 100.00% 100.00% 64,649 36 2037 [0.00) 0.00 100.00% 100.00% 100.00% 100.00% 0.00

in oL i 5

1991 1992 1993 1994 +/-

11995 I 1996 o 9.

1997 0 (t 1998 1999 2000 ooo CLoq 2001

" v 0 El 2002 -

Ie 2003 +

2004- .

2005 2006 +,

2007 2008 -_.

.2009 2010  :

'S 2011

.5 2012 2013 2014 +

2015+

12016 ;

12017 -

20181 2019

!2020 -

2021 2022 -

IiI 2023 "' \

2024 +

2025 +

12026 +

20271 a coC

>-M 5 14 2028-; a 2029 T -nl(ac 2030 I 2031 2032 2033 2034 2035 2036 +

2037

Palo Verde Nuclear Generating Station Appendix B, Tab 3 Units 1, 2, & 3 EPE 2004 Annual Funding Status Report Section 2.1.7 [Restated]

Summary of Model Assumptions:

Assumed Rate of Earnings 7.3310%

Assumed Rate of Cost Escalation 5.2925%

Assumed Rate of Inflation 3.9031%

Treatment of Water Reclamation Facility Included Contingency Factor 25.0000%

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 Part 3. Tables and Curves 3.1 Table of Estimated Denosits, Income And Committed Accumulations to End of Funding Period for Each Unit:

(Curves presented are those most recently approved by the Termination Funding Committee) 3.1.1 Table For Unit 1 (In Thousands):

Estimated Estimated Estimated Estimated Percent Funding Year Deposits Income Accumulation Costs Funded Floor 1991 3,065.044 43,696.922 7.01% 5.61%

1992 1,274.596 266.134 4,605.774 72,015.436 6.40% 5.12%

1993 1,284.594 327.887 6,135.622 73,556.865 8.34% 6.67%

1994 1,335.472 499.183 7,970.276 77,449.852 10.29% 8.23%

1995 1,388.364 638.884 9,997.525 81,548.874 12.26% 9.81%

1996 1,443.352 793.156 12,234.033 85,864.837 14.25% 11.40%

1997 1,500.517 963.255 14,697.806 90,409.222 16.26% 13.01%

1998 1,559.947 1,150.542 17,408.294 95,194.117 18.29% 14.63%

1999 1,621.730 1,356.483 20,386.507 100,232.252 20.34% 16.27%

2000 1,685.960 1,582.665 23,655.133 105,537.030 22.41% 17.93%

2001 1,752.734 1,830.800 27,238.667 111,122.563 24.51% 19.61%

2002 1,822.153 2,102.737 31,163.557 117,003.709 26.63% 21.31%

2003 1,971 .475 2,402.600 35,537.632 123,196.114 28.85% 23.08%

2004 2,049.557 2,734.343 40,321.532 129,716.251 31.08% 24.87%

2005 2,130.732 3,097.052 45,549.315 136,581.465 33.35% 27.01%

2006 2,321.329 3,496.227 51,366.871 143,810.020 35.72% 29.29%

2007 2,413.268 3,937.120 57,717.259 151,421.146 38.12% 31 .64%

2008 2,508.848 4,418.261 64,644.367 159,435.089 40.55% 34.06%

2009 2,758.042 4,947.099 72,349.508 167,873.168 43.10% 36.63%

2010 2,867.277 5,530.699 80,747.484 176,757.832 45.68% 39.29%

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 3.1.1 Table For Unit 1 (In Thousands) - continued:

Estimated Estimated Estimated Estimated Percent Funding Year Deposits Income Accumulation Costs Funded Floor 2011 2,980.838 6,166.623 89,894.946 186,112.716 48.30% 42.02%

2012 3,317.760 6,865.187 100,077.893 195,962.705 51.07% 44.94%

2013 3,449.163 7,636.102 111,163.158 206,334.004 53.88% 47.95%

2014 3,585.771 8,475.150 123,224.079 217,254.202 56.72% 51 .05%

2015 4,065.222 9,397.178 136,686.478 228,752.350 59.75% 54.38%

2016 4,226.229 10,416.018 151,328.725 240,859.036 62.83% 57.80%

2017 4,393.613 11,523.935 167,246.272 253,606.467 65.95% 61.33%

2018 5,138.776 12,743.895 185,128.943 267,028.554 69.33% 65.17%

2019 5,342.302 14,096.977 204,568.222 281,161.003 72.76% 69.12%

2020 5,553.889 15,567.572 225,689.683 296,041.410 76.24% 73.19%

2021 6,957.220 17,197.815 249,844.719 311,709.360 80.15% 77.75%

2022 7,232.768 19,025.510 276,102.996 328,206.534 84.12% 82.44%

2023 7,519.229 21,011.985 304,634.210 345,576.819 88.15% 87.27%

2024 7,817.036 23,106.171 334,709.788 362,973.935 92.21% 92.21%

2025 25,087.342 358,030.257 380,323.895 94.14% 94.14%

2026 25,233.305 360,113.346 376,077.046 95.76% 95.76%

2027 21,501.537 306,855.984 317,265.368 96.72% 96.72%

2028 17,190.449 245,330.930 251,175.083 97.67% 97.67%

2029 12,240.609 174,690.029 177,200.486 98.58% 98.58%

2030 6,587.274 94,009.301 94,692.148 99.28% 99.28%

2031 2,415.824 34,477.067 34,477.067 100.00% 100.00%

23

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 3.1.2 Table for Unit 2 (In Thousands):

Estimated Estimated Estimated Estimated Percent Funding Year Deposits Income Accumulation Costs Funded Floor 1991 3,619.007 43,321.662 8.35% 6.68%

1992 1,148.211 304.386 5,071.604 70,884.836 7.15% 5.72%

1993 1,156.671 403.387 6,489.839 72,375.311 8.97% 7.17%

1994 1,202.482 522.202 8,214.523 76,205.765 10.78% 8.62%

1995 1,250.107 653.472 10,118.102 80,238.944 12.61% 10.09%

1996 1,299.619 798.274 12,215.996 84,485.579 14.46% 11.57%

1997 1,351 .092 957.772 14,524.859 88,956.966 16.33% 13.06%

-1998 1,404.603 1,133.222 17,062.684 93,665.001 18.22% 14.57%

1999 1,460.234 1,325.984 19,848.902 98,622.208 20.13% 16.10%

2000 1,518.068 1,537.522 22,904.492 103,841.775 22.06% 17.65%

2001 1,578.192 1,769.421 26,252.106 109,337.586 24.01% 19.21%

2002 1,640.698 2,023.390 29,916.194 115,124.263 25.99% 20.79%

2003 1,767.574 2,302.983 33,986.751 121,217.198 28.04% 22.43%

2004 1,837.581 2,611.632 38,435.964 127,632.602 30.11% 24.09%

2005 1,910.360 2,948.891 43,295.215 134,387.539 32.22% 25.77%

2006 2,070.670 3,319.462 48,685.347 141,499.981 34.41% 27.87%

2007 2,152.681 3,727.873 54,565.901 148,988.848 36.62% 30.03%

2008 2,237.940 4,173.328 60,977.170 156,874.061 38.87% 32.26%

2009 2,444.911 4,662.132 68,084.212 165,176.599 41 .22% 34.62%

2010 2,541.744 5,200.322 75,826.278 173,918.548 43.60% 37.06%

2011 2,642.412 5,786.468 84,255.157 183,123.162 46.01% 39.57%

2012 2,917.665 6,429.184 93,602.006 192,814.930 48.54% 42.23%

2013 3,033.222 7,136.661 103,771.890 203,019.633 51.11% 44.98%

2014 3,153.356 7,906.280 114,831.526 213,764.419 53.72% 47.81%

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 3.1.2 Table for Unit 2 (In Thousands) - continued:

Estimated Estimated Estimated Estimated Percent Funding Year Deposits Income Accumulation Costs Funded Floor 2015 3,535.811 8,750.184 127,117.521 225,077.871 56.48% 50.83%

2016 3,675.850 9,679.802 140,473.173 236,990.086 59.27% 53.94%

2017 3,821.436 10,690.173 154,984.782 249,532.753 62.11% 57.14%

2018 4,392.538 11,799.390 171,176.710 262,739.239 65.15% 60.59%

2019 4,566.509 13,024.259 188,767.478 276,644.676 68.23% 64.14%

2020 4,747.370 14,354.720 207,869.568 291,286.057 71 .36% 67.79%

2021 5,730.719 15,821 .210 229,421.497 306,702.331 74.80% 71.81%

2022 5,957.690 17,451.419 252,830.607 322,934.509 78.29% 75.94%

2023 6,193.650 19,221 .815 278,246.072 340,025.772 81.83% 80.19%

2024 8,791.549 21,208.585 308,246.207 358,021.589 86.10% 85.24%

2025 9,139.748 23,478.715 340,864.670 376,969.831 90.42% 90.42%

2026 25,671.399 366,365.540 396,741.353 92.34% 92.34%

2027 27,381.115 390,765.507 414,599.909 94.25% 94.25%

2028 27,376.844 390,704.542 407,652.600 95.84% 95.84%

2029 23,348.142 333,209.534 344,105.794 96.83% 96.83%

2030 18,467.306 263,553.410 269,530.194 97.78% 97.78%

2031 12,867.270 183,633.329 186,096.933 98.68% 98.68%

2032 6,475.243 92,410.462 93,077.319 99.28% 99.28%

2033 2,359.251 33,669.696 33,669.696 100.00% 100.00%

25

EL PASO ELECTRIC COMPANY Anfiual Funding Status Report For the Year Ended December 31, 2004 3.1.3 Table for Unit 3 (In Thousands):

Estimated Estimated Estimated Estimated Percent Funding Year Deposits Income Accumulation Costs Funded Floor 1991 652.302 46,068.418 1.42% 1.13%

1992 1,282.171 84.542 2,019.015 74,741.789 2.70% 2.16%

1993 1,294.243 183.753 3,442.544 76,440.553 4.50% 3.60%

1994 1,345.503 296.535 5,084.582 80,486.159 6.32% 5.05%

1995 1,398.793 421.734 6,905.110 84,745.877 8.15% 6.52%

1996 1,454.194 560.441 8,919.745 89,231.041 10.00% 8.00%

1997 1,511.789 713.834 11,145.367 93,953.581 11.86% 9.49%

1998 1,571.665 883.188 13,600.220 98,926.061 13.75% 11.00%

1999 1,633.912 1,069.880 16,304.012 104,161.709 15.65% 12.52%

2000 1,698.625 1,275.398 19,278.034 109,674.453 17.58% 14.06%

2001 1,765.900 1,501.348 22,545.282 115,478.958 19.52% 15.62%

2002 1,835.841 1,749.467 26,130.589 121,590.666 21.49% 17.19%

2003 1,968.776 2,023.290 30,122.655 128,025.835 23.53% 18.82%

2004 2,046.751 2,326.245 34,495.652 134,801.584 25.59% 20.47%

2005 2,127.815 2,657.989 39,281.456 141,935.939 27.68% 22.14%

2006 2,293.851 3,023.184 44,598.491 149,447.879 29.84% 23.87%

2007 2,384.702 3,426.332 50,409.524w 157,357.387 32.04% 25.63%

2008 2,479.150 3,866.802 56,755.476 165,685.505 34.25% 27.75%

2009 2,690.503 4,350.805 63,796.785 174,454.387 36.57% 29.99%

2010 2,797.064 4,884.311 71,478.159 183,687.361 38.91% 32.30%

2011 2,907.844 5,466.162 79,852.165 193,408.989 41.29% 34.68%

2012 3,183.853 6,104.764 89,140.783 203,645.132 43.77% 37.21%

2013 3,309.953 6,808.145 99,258.881 214,423.023 46.29% 39.81%

2014 3,441.047 7,574.165 110,274.093 225,771.331 48.84% 42.49%

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 3.1.3 Table for Unit 3 (In Thousands) - continued:

Estimated Estimated Estimated Estimated Percent Funding Year Deposits Income Accumulation Costs Funded Floor 2015 3,814.940 8,414.484 122,503.517 237,720.247 51.53% 45.35%

2016 3,966.035 9,340.145 135,809.697 250,301.558 54.26% 48.29%

2017 4,123.113 10,347.106 150,279.916 263,548.733 57.02% 51.32%

2018 4,659.502 11,452.246 166,391.665 277,497.013 59.96% 54.57%

2019 4,844.046 12,671.365 183,907.075 292,183.503 62.94% 57.91%

2020 5,035.900 13,996.451 202,939.426 307,647.274 65.96% 61.35%

2021 5,889.479 15,454.105 224,283.010 323,929.463 69.24% 65.08%

2022 6,122.738 17,068.788 247,474.536 341,073.385 72.56% 68.93%

2023 6,365.235 18,822.970 272,662.741 359,124.646 75.92% 72.89%

2024 8,106.273 20,768.965 301,537.978 378,131.267 79.74% 77.35%

2025 8,427.330 22,953.584 332,918.891 398,143.812 83.62% 81.95%

2026 8,761.103 25,327.357 367,007.351 419,215.517 87.55% 86.67%

2027 2,243.965 27,779.761 397,031.077 441,402.440 89.95% 89.95%

2028 29,734.433 424,350.531 462,220.811 91.81% 91.81%

2029 31,725.894 452,771.373 483,203.810 93.70% 93.70%

2030 32,272.786 460,576.256 483,014.441 95.35% 95.35%

2031 28,835.010 411,514.545 426,558.518 96.47% 96.47%

2032 23,533.147 335,849.805 344,686.147 97.44% 97.44%

2033 17,436.197 248,838.081 252,952.800 98.37% 98.37%

2034 10,463.311 149,325.578 150,544.024 99.19% 99.19%

2035 4,310.701 61,519.522 61,519.522 100.00% 100.00%

27

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 3.2 Percent Funded Curve and Funding Floor Curve for Each Unit:

3.2.1 Unit 1 Curve:

00%

-/___________________

0% Committed t ccumulation 0% - -

0% - - - - - - -

0% Actual 0%

12%

1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 3.2.2 Unit 2 Curve:

0I 0

'0

'6I 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 29

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 3.2.3 Unit 3 Curve:

100%

90%

80%

~~~Floor -_

Committed 70% - - - _ _ Accumulation 60%

50%

1X1XX7W~~ctual<XX 40%

30%

_ _ 2004 Funding Status

$ Amount Percent 20%

Actual 27,342 21.70 10%

Committed 32,237 25.59 Floor 25,787 20.47 0%

ii )91 1994 1997 2000 2003 2006 2009 20i 2 2015 2018 2021 2024 2027 2030 2033

Palo Verde Nuclear Generating Station Appendix B, Tab 4 Units 1, 2, & 3 SCE 2004 Annual Funding Status Report Section 2.1.7 [Restated]

Assumptions Used in Developing Committed Accumulations Cost Study 2001 TLG study, including all Summary Table Costs (page xiii of xix)

(all non-unit specific costs are allocated equally among all three units except Stored Steam Generator & Storage Facility allocated to Unit 2 only)

Contingency Factors: 2001 TLG Study Annual Escalation Assumption: Approximately 7.3% over the funding period.

Rate of Return Assumption: 5.25% per year (after tax)

Southern California Edison Company Palo Verde Unit 1 Funding Plan 155%

fin Adz Actual 130%

/1\ Accmlai 105%

-w- - -

80%

jk 2004 FUNDING STATUS 55% $ AMOUNT PERCENT I> Fnding COMMITTED $123,535 103%

30% Committed Floor Accumulations ACTUAL $ 181,062 151%

5% FLOOR $ 98,828 82%

-20% 0)

In N- U) 0) v- Cf, LO N- 0)

0) 0) 0) cm CD CM N v-

0) CD 0, 0F) o1 0m 0 0 0 0 CM 0M 0CM cm 0

V1- CM N C, CM C'1 N N\ cm CM 0j Nq cm

Southern California Edison Company Palo Verde Unit 2 Funding Plan 150%

125%

100%

75%

50%

25%

0%

T- C2 LA N; 0 LO Mv Nl 0)o 0D

)

CD 0)

0) 0) 0 CD 0) 0 0 8CM 2-0 7-.

0 LO v- T-0 0a 0

7-co C,,

0 LO ram 0) 2-Mv N2 0 NO 8 0 0 7-" T- I 7r- N cm N cm cm Nv N Nv CM CM CM

Southern California Edison Company Palo Verde Unit 3 Funding Plan 155%

-Actual Accumulation 130%

105% -

2003 FUNDING STATUS 55% Funding $AMOUNT PERCENT 3 - Floor COMMITTED $148,982 112%

- Committed Accumulations ACTUAL $197,625 149%

5%-

FLOOR $119,185 89%

-20% _v C)

O' C) _ U1 o C9 _ C co LO - o Ir c- IL 0) _ c u C) o)

0) ow T) 6; a) aw) o o o o o o0 T-o Ir-o0 T-o Q _r ,CQ o

QX O~ COI a cJ c

_r _- _- _- T_ Mfi C CMi N C14 04 C0l -4 i CU C0l C CM CMl CYl C CM C 0lC4

Southern California Edison Company ANPP Funding Plan - All Units 150% -I God~,4s/Actual Accumulation 125%

100%

75% 2003 FUNDING STATUS

$ AMOUNT PERCENT 50%

Funding COMMITTED $ 407,131 106%

25%

Floor ACTUAL $ 562,003 146%

Committed Accumulations FLOOR $ 326,064 85%

0% to If co co On cv, to 0) 0)

0)

CD CD 00)- Ir- Ns V-0 0 Ln 0 r-0 CM 0

N cm 0 0 Nv 0) 2N CO co 0

6)

C7 90 N cm cm cm cm cm N 0m N oN N N N N

SOUTHERN CALIFORNIA EDISON COMPANY 2004 PALO VERDE UNIT 1 FUNDING STATUS (S THOUSANDS) 0 (1) (2) (3) (4) (5) (6) (7) (8) (9)

FUNDING PLAN FUNDING FLOOR CURVE . -

ACTUAL FUNDING XEAR FUND S EST. COST %6Ft]NfDED CRITERIA PERCENT SAMOJUNT FUND S ESLCo:I 96 FUNDED 1991 25,499 44,219 58% 80% 46% 20,399 27,001 44,219 61%

1992 32,402 69,860 46% 80% 37% 25,922 33,787 69,860 48%

1993 38,797 74,905 52% 80% 41% 31,038 41,611 74,905 56%

1994 45,527 80,314 57% 80% 45% 36,422 45,930 80,314 57%

1995 54,963 86,114 64% 80% 51% 36.351 64,177 71,191 90%

1996 64,895 92,333 70% 80% 56% 42,746 79,273 76,331 104%

1997 75,348 99,000 76% 80% 61% 49,760 99,810 81,842 122%

1998 86,350 106,150 81% 80% 65% 56,862 122,110 87,751 139%

1999 97,930 113,815 86% 80% 69% 64,987 136,263 94,458 144%

2000 110,118 122,034 90% 80% 72% 72,920 141,277 101,278 139%

2001 122,945 130,847 94% 80% 75% 81,660 136,837 108,590 126%

2002 136,446 140,296 97% 80% 78% 80,958 136,336 104,328 131%

2003 1S0,656 150,427 100% 80% 80% 89,488 160,956 111,860 .

144%

2004 2005 165,611 181,352

= 161,290 172,937 103%

105%

80%

81%

82%

85%

98,828 181,062 119,937 151%

2006 197,919 185,426 107% 82% 88%

2007 215,356 198,816 108% 83% 90%

2008 233,709 213,174 110% 84% 92%

2009 253,025 228,568 111% 85% 94%

2010 273,355 245,074 112% 86% 96%

2011 294,752 262,772 112% 87% 98%

2012 317,273 281,747 113% 88% 99%

2013 340,976 302,094 113% 89% 100%

2014 365.923 323,909 113% 90% 102%

2015 392,180 347,300 113% 91% 103%

2016 419,816 372,380 113% 92% 104%

2017 448,903 399,271 112% 93% 105%

2018 479,516 428,104 112% 94% 105%

2019 511,737 459,019 111% 95% 106%

2020 545,650 492,167 111% 96% 106%

2021 581,343 527,709 110% 97% 107%

2022 618,909 565,817 109% 98% 107%

2023 658,448 606,677 109% 99% 107%

2024 700,063 650,487 108% 100% 108%

2025 696,219 656,864 106% 100% 106%

2026 594,779 566,305 105% 100% 105%

2027 477,988 459,182 104% 100% 104%

2028 344,308 333,566 103% 100% 103%

2029 192,070 187,340 103% 100% 103%

2030 69,900 68,615 102% 100% 102%

2031 0 0 100% 100% 100%

2032 2033 2034 2035

SOUTHERN CAUFORNIA EDISON COMPANY.

2004 PALO VERDE UNIT 2 FUNDING STATUS (STHOUSANDS)

(1) (2) (3) (4) (5) (6) (7) (8) (9)

FUNDING PLAN FUNDING FLOOR CURVE ACTUAL FUNDING VAR FUND S E5T-COST T IUNDED CRDRA PERCENT SAMOUN FlND S LESTCOST  % FUNDEn 1991 24,496 43,826 56% 80% 45% 19,597 25,943 43,826 59%

1992 31,537 68,737 46% 80% 37% 25,230 32,869 68,737 48%

1993 38,092 74,905 51% 80% 41% 30,474 40,791 74,905 54%

1994 44,991 80,314 56% 80% 45% 35,993 45,358 80,314 56%

1995 54,543 86,114 63% 80% 51% 37,442 63,426 73,893 86%

1996 64,597 92,333 70% 80% 56% 44,368 78,392 79,228 99%

1997 75,179 99,000 76% 80% 61% 51,648 98,759 84,948 116%

1998 86,317 106,150 81% 80% 65% 59,021 120,878 91,082 133%

1999 98,039 113,815 86% 80% 69% 68,410 135,329 99,433 136%

2000 110,376 122,034 90% 80% 72% 76,761 140,883 106,613 132%

2001 123,362 130,847 94% 80% 75% 85,961 137,075 114,310 120%

2002 137,029 140,296 98% 80% 78% 89,426 137,161 114064 120%

2003 151,413 150,427 101% 80% 81% 98,818 162,492 122,300 133%

2004 166,553 161,290 103% 80% 83% 108,051 183,316 131,130 140%

2005 182,487 172,937 106% 80% 84%

2006 199,259 185,426 107% 81% 87%

2007 216,910 198,816 109% 82% 89%

2008 235,488 213,174 110% 83% 92%

2009 255,042 228,568 112% 84% 94%

2010 275,622 245,074 112% 85% 96%

2011 297,283 262,772 113% 86% 97%

2012 320,081 281,747 114% 87% 99%

2013 344,076 302,094 114% 88% 100%

2014 369,330 323,909 114% 89% 101%

2015 395,910 347,300 114% 90% 103%

2016 423,886 372.380 114% 91% 104%

2017 453,331 399,271 114% 92% 104%

2018 484,321 428,104 113% 93% 105%

2019 516,939 459,019 113% 94% 106%

2020 551,268 492,167 112% 95% 106%

2021 587,400 527,709 111% 96% 107%

2022 625,430 565,817 111% 97% 107%

2023 665,455 606,677 110% 98% 107%

2024 707,582 650,487 109% 99% 108%

2025 751,921 695,716 108% 100% 108%

2026 790,166 742,858 106% 100% 106%

2027 776,927 739,787 105% 100% 105%

2028 657,874 631,382 104% 100% 104%

2029 520,952 503,822 103% 100% 103%

2030 364,378 354,929 103% 100% 103%

2031 186,212 182,311 102% 100% 102%

2032 62,940 61,939 102% 100% 102%

2033 0 0 100% 100% 100%

2034 2035

SOUTHERN CALIFORNIA EDISON COMPANY 2004 PALO VERDE UNIT 3 FUNDING STATUS (S THOUSANDS)

(1) (2) (3) (4) (5) (6) (7) (8) (9)

FUNDING PLAN -

FUNDING FLOOR CURVE ACTUAL FUNDING XEAR FUND S 5T. COT 9 FUNQFD CR8TERA PERCENT S AMOUNT FuNa S EST. COST 46 FUlNnDF 1991 26,087 48,798 53% 0% 43% 20,870 27,730 48,798 57%

1992 34,110 73,450 46% 80% 37% 27,288 35,578 73,450 4896 1993 41,562 74,905 55% 80% 44% 33,250 44,473 74,905 59%

1994 49,405 80,314 62% 81 0% 49% 39,524 49,825 80,314 6296 1995 59,673 86,114 69% 81 D% 55% 46,253 69,421 83,434 83%

1996 70,480 92,333 76% 810% 61% 54,390 85,640 89,458 96%

1997 81,854 99,000 83% 8'0% 66% 58,318 107,775 95,917 1129%

1998 93.826 106,150 88% 810% 71% 72,401 131,789 102,842 128%

1999 106,426 113,815 94% 810% 75% 80,398 147,469 106,913 138%

2000 119,688 122,034 98% 8S0% 78% 89,871 153,445 114,632 134%

2001 133,646 130,847 102% 8i0% 82% 100,293 149,226 122,908 121%

8i 2002 148,336 140,296 106% 0% 85% 98,120 149,306 115,708 129%

2003 163,798 150,427 109% 8i0% 87% 108,182 176,507 124,062 142%

2004 180,072 161,290 810% 119,185 197,625 133,019

= 112%

81,%

89% 14996 2005 197,200 172,937 114% 91%

Z006 215,227 185,426 116% 810% 93%

2007 234,201 198,816 118% 891% 95%

2008 254,171 213,174 119% 812% 98%

2009 275,189 228,568 120% 8:3% 100%

2010 297,311 245,074 121% 8'4% 102%

2011 320,594 262,772 122% 5% 104%

2012 345,099 281,747 122% 816% 1105%

2013 370,891 302,094 123% 7% 1107%

2014 398,037 323,909 123% 813% 108%

2015 426,609 347,300 123% I% 109%

8.

2016 456,680 372,380 123% 91 0% 110%

9t 2017 488,330 399,271 122% 1% 111%

2018 521,641 428,104 122% 2% 112%

2019 556,702 459,019 121% 3% 113%

2020 593,603 492,167 121% 4% 113%

2021 632,442 527,709 120% 5% 114%

2022 673,319 565,817 119% 916% 114%

2023 716,343 606,677 118% 7% 115%

2024 761,625 650,487 117% 918% 115%

2025 809,284 700,291 116% M% 114%

2026 859,446 753,907 114% 1010% 114%

2027 912,241 811,628 112% 0% 112%

2028 960,134 873,769 110% N% 110%

2029 951,127 881,253 108% 1010% 108%

2030 845,825 793,489 107% 0% 107%

10(

10t 2031 700,015 664,025 105% 0% 105%

Z032 532,660 510,759 104% 10(0% 104%

2033 341,615 330,855 103% 0% 103%

10(

2034 150,456 147,093 102% 1o( 3% 102%

2035 0 (0) 100% t)% 100%

SOUTHERN CALIFORNIA EDISON COMPANY 2004 ANPP FUNDING PLAN-ALL UNITS (S THOUSANDS)

(1) (2) (3) (4) (5) (6) (7) (8) (9)

FUNDING PLAN FUNDING FLOOR CURVE ACTUAL FUNDING xYA FND S M. COST FUNDED CRITERIA PERCENT S AMOUNT FtlND S ST. CO 9 Fl UNnED 1991 76,082 136,843 56% 80% 44% 60,866 80,674 136,843 59%

1992 98,049 212,047 46% 80% 37% 78,439 102,234 212,047 48%

1993 118,451 224,715 53% 80% 42% 94,761 126,875 224,715 56%

1994 139,923 240,942 58% 80% 46% 111,938 141,113 240,942 59%

1995 169,179 258,342 65% 80% 52% 120,045 197,024 228,518 86%

1996 199,972 276,998 72% 80% 58% 141,504 243,378 245,017 99%

1997 232,381 297,001 78% 80% 63% 159,726 306,343 262,707 117%

1998 266,493 318,449 84% 80% 67% 188,284 374,776 281,675 133%

1999 302,39S 341,445 89% 80% 71% 214,173 419,061 300,804 139%

2000 340,182 366,102 93% 80% 74% 239,957 435,605 322,522 135%

2001 379,953 392,540 97% 80% 77% 268,347 423,138 345,808 122%

2002 421,811 420,887 100% 80% 80% 268,504 422,803 334,100 127%

2003 465,867 451,281 103% 80% 83% 296,488 499,955 358,222 140%

=

2004 512,236 483,870

= 106%

108%

80% = 85%

87%

326,064 0

562,003 384,086 146%

2005 561,039 518,812 80%

2006 612,405 556,278 110% 81% 89% 0 2007 666,467 596,449 112% 82% 92% 0 2008 723,368 639,521 113% 83% 94% 0 2009 783,256 685,704 114% 84% 96% 0 2010 846,288 735,221 115% 85% 98% 0 Z011 912,629 788,315 116% 86% 1 00% 0 2012 982,453 845,242 116% 87% 101% 0 2013 1,055,943 906,281 117% 88% 103% 0 2014 1,133,290 971,727 117% 89% 104% 0 2015 1,214,699 1,041,900 117% 90% 105% 0 2016 1,300,382 1,117,140 116% 91% 106% 0 2017 1,390,564 1,197,813 116% 92% 107% 0 2018 1,485,478 1,284,312 116% 93% 108% 0 2019 1,585,378 1,377,058 115% 94% 108% 0 2020 1,690,521 1,476,501 114% 95% 109% 0 2OZ1 1,801,185 1,583,126 114% 96% 109% 0 2022 1,917,658 1,697,450 113% 97% 110% 0 2023 2,040,246 1,820,030 112% 98% 110% 0 2024 2,169,270 1,951,462 111% 99% 110% 0 2025 2,257,424 2,052,870 110% 100% 110% 0 2026 2,244,391 2,063,070 109% 100% 109% 0 2027 2,167,156 2,010,597 108% 100% 108% 0 2028 1,962,316 1,838,717 107% 100% 107% 0 2029 1,664,149 1,572,415 106% 100% 106% 0 2030 1,280,103 1,217,033 1 05% 100% 105% 0 2031 886,227 846,336 105% 100% 105% 0 2032 595,600 572,698 104% 100% 104% 0 2033 341,615 330,855 103% 100% 103% 0 2034 150,456 147,093 102% 100% 102% 0 2035 0 (0) 0% 100% 0% 0

Palo Verde Nuclear Generating Station Appendix B, Tab 5 Units 1, 2, & 3 PNM 2004 Annual Funding Status Report Section 2.1.7 [Restated]

Summary of Major Assumptions in Developing Accumulation Curves Portfolio Yield 9.50%

Mortality 1983 Group Annuity Mortality Policy Loan Interest Rate 8.50%

Inflation Rate 5.00%

Side Fund Interest Rate 5% After Tax Section 2.1.8 [Restated]

Decommissioning Cost Assumptions Used in the Annual Funding Status Report Cost Study 200ITLG Water Reclamation Facility Included Water Treatment and Ponds Included Reservoir Included ISFSI Included Unit 2 Steam Generator Storage Included In addition:

After Tax Rate of Return Assumption 6.31%

PALO VERDE UNIT I

($NO)

Funding Plan Funding Floor Curve -

Actual Funding Year Fund S Est. Costs  % Funded Criteria Percent S Amount Fund S Est. Cost % Funded 1991 1,095 28,746 3.81% 80% 3.05% 876 1,096 28,746 3.81%

1992 3,450 45,099 7.65% 80% 6.12% 2,760 2,334 45,099 5.18%

1993 5,981 47,354 12.63% 80% 10.10/o 4,785 3,691 47,354 7.79%

1994 6,807 49,722 13.69/ 80% 10.95% 5,446 4,117 49,722 8.28%

1995 7,018 45,959 15.27% 80% 12.22% 5,614 4,235 45,959 9.21%

1996 8,107 48,257 16.80%/6 80% 13.44% 6,486 8,094 48,257 16.77%

1997 9,212 50,670 18.18% 80% 14.54% 7,369 9,999 50,670 19.73%

1998 11,170 56,873 19.64% 80% 15.71% 8,936 14,095 56,873 24.78%

1999 12,953 59,717 21.69/o 80% 17.35% 10,362 16,354 59,717 27.39%/

2000 15,193 62,703 24.23% 80% 19.38% 12,154 17,447 62,703 27.82%

2001 16,828 62,816 26.79% 80% 21.43% 13,463 17,673 62,816 28.13%

2002 19,371 65,956 29.37% 80% 23.56% 15,497 20,057 65,956 30.41%

2003 22,147 69,254 31.98% 80% 25.58% 17,718 24,991 69,254 36.09%

2004 25,153 72,717 34.59% 80% 27.67% 20,122 29,313 72,717 40.31 %j 2005 28,426 76,353 37.23%

. 80% 29.78% 22,741 2006 31,980 80,170 39.89% 81% 32.31% 25,904 2007 35,818 84,179 42.55% 82% 34.89% 29,371 2008 39,960 88,388 45.21% 83% 37.52% 33,167 2009 44,538 92,807 47.990/% 84% 40.31% 37,412 2010 49,396 97,448 50.69/o 85% 43.09% 41,987 2011 54,588 102,320 53.35% 86% 45.88% 46,945 2012 60,390 107,436 56.21% 87% 48.90% 52,539 2013 66,602 112,808 59.04% 88% 51.96% 58,609 2014 73,260 118,448 61.85% 89% 55.05% 65,202 2015 80,381 124,371 64.63% 90% 58.17% 72,343 2016 87,991 130,589 67.38% 91% 61.32% 80,072 2017 96.490 137,119 70.37% 92% 64.74% 88,771 2018 105,562 143,974 73.32% 93% 68.19% 98,173 2019 115,239 151,173 76.23% 94% 71.66% 108,325 2020 125,557 158,732 79.10°% 95% 75.15% 119,279 2021 136,551 166,668 81.93% 96% 78.65% 131,089 2022 148,524 175,002 84.87% 97% 82.32% 144,068 2023 160,083 181,954 87.98% 98% 86.22% 156,881 2024 172,616 189,127 91.27% 99% 90.36% 170,890 2025 170,294 184,061 92.52% 100% 92.52% 170,294 2026 143,299 152,836 93.76% 100% 93.76% 143,299 2027 119,683 125,969 95.01% 100% 95.01% 119,683 2028 89,667 93,150 96.26% 100% 96.26% 89,667 2029 58,765 60,266 97.51% 100% 97.51% 58,765 2030 34,612 35,050 98.75% 100% 98.75% 34,612 2031 20,748 20,748 100.00% 100% 100.00% 20,748 2032 8,527 8,527 100.00% 100% 100.00% 8,527 2033 7,557 7,557 100.00% 100% 100.00/o 7,557 2034 19,732 19,732 100.00% 100% 100.00% 19,732 2035 18,026 18,026 100.00% 100% 100.00% 18,026 2036 31,357 31,357 100.00 0% 100% 100.00% 31,357 2037 14,117 14,117 100.00/, 100% 100.00%/0 14,117 Exhibit 3.4

Public Service Company Of New Mexico Palo Verde Unit 1 120.00% -

2004 Funding Status

$($000) Percent 100.00% Committed $25,153 34.59%

Actual $29,313 40.31%

Floor $20,122 27.67%

80.00%

Committed Accumulation 60.00% +1-Actual Accumulations 40.00%

20.00%

0.00% 1; Ii N419 Ne2  ; 9u a I'q99 ,l1 ,eot -e°t el ,°° IPNN IPN°5 10`3 10<1 e>°6 ¢ e~t e, 101* BLO TRO So SlpI1 Ipo Exhibit 3.4

PUBLIC SERVICE COMPANY OP NEW MEXICO PALO VERDE UNIT 2

($000)

Funding Plan Funding Fleer Curve Actual Findine Year Fund $Est Costs %Funded Criteria Percent S Amount FundS Est. Cos %Funded 1991 1,096 28,499 3.85% 80% 3.08% 877 1,096 28,499 3.85%

1992 3,426 44,375 7.72% 80% 6.18% 2,741 2,334 44,375 5.26%

1993 5,936 46,594 12.74% 80% 10.19% 4,749 3,691 46,594 7.92%

1994 6,756 48,923 13.81% 800/. 11.05% 5,405 4,117 48,923 8.42%

1995 7,346 47,703 15.40% 80% 12.32% 5,877 4,235 47,703 8.88%

1996 8,485 50,088 16.94% 80% 13.55% 6,788 8,479 50,088 16.93%

1997 9,645 52,593 18.34% 80% 14.67% 7,716 10,368 52,593 19.71%

1998 11,860 59,869 19.81% 80%!, 15.85% 9,488 14,528 59,869 24.27%

1999 13,754 62,862 21.88% 80% 17.50% 11,003 16,931 62,862 26.93%

2000 16,132 66,005 24.44% 80%/ 19.55% 12,905 18,040 66,005 27.33%

2001 18,557 68,678 27.02% 80% 21.62% 14,845 18,765 68,678 27.32%

2002 21,359 72,112 29.62% 80% 23.70% 17,088 21,329 72,112 29.58%

2003 24,419 75,717 32.25% -

80°/ 25.80% 19,535 26,333 75,717 34.78%

IvUU4 Z7i9 79,503 34.=6M b01/0 27.9 0 Z , J ,/y4 7 0i 2005 31,346 83,478 37.55% 80% 30.04% 25,077 2006 35,271 87,652 40.24% 81% 32.59% 28,570 2007 39,501 92,035 42.92% 82% 35.19% 32,391 2008 44,066 96,637 45.60% 83% 37.85% 36,575 2009 49,111 101,468 48.40% 84% 40.66% 41,253 2010 54,475 106,542 51.13% 85% 43.46% 46,304 2011 60,197 111,869 53.81% 86% 46.28% 51,769 2012 66,589 117,462 56.69% 87% 49.32% 57,933 2013 73,446 123,336 59.55% 88% 52.40% 64,633 2014 80,784 129,502 62.38% 89% 55.52% 71,897 2015 88,644 135,977 65.19% 90% 58.67% 79,779 2016 97,045 142,776 67.97% 91% 61.85% 88,311 2017 106,410 149,915 70.98% 92% 65.30% 97,897 2018 116,421 157,411 73.96% 93% 68.78% 108,272 2019 127,085 165,281 76.89% 94% 72.28% 119,460 2020 138,455 173,545 79.78% 95% 75.79% 131,532 2021 150,589 182,223 82.64% 96% 79.33% 144,565 2022 163,782 191,334 85.60% 97% 83.03% 158,868 2023 177,616 200,901 88.41% 98% 86.64% 174,064 2024 192,024 210,946 91.03% 99% 90.12% 190,104 2025 200,605 218,524 91.80% 100% 91.80% 200,605 2026 168,000 180,995 92.82% 100% 92.82% 168,000 2027 142,125 151,438 93.85% 100% 93.85% 142,125 2028 111,066 117,072 94.87% 1000/c 94.87% 111,066 2029 84,893 88,522 95.90% 100% 95.90% 84,893 2030 78,080 80,562 96.92% 100%/ 96.92% 78,080 2031 56,115 57,290 97.95% 100% 97.95% 56,115 2032 44,411 44,873 98.97% 100°/ 98.97% 44,411 2033 30,594 30,594 100.00% 100% 100.00% 30,594 2034 12,438 12,438 100.00% 100%/. 100.00% 12,438 2035 4,900 4,900 100.00% 100% 100.00% 4,900 2036 31,357 31,357 100.00% 100% 100.00% 31,357 2037 14,117 14,117 100.00% 100% 100.00% 14,117 Exhdbit 3.4

Public Service Comany of New Mexico Palo Verde Unit 2 120.00% -

2004 Funding Status

$($000) Percent 100.00% Committed $27,739 34.89%

Actual $30,794 38.73%

Floor $22,191 27.91%

80.00%

Committed Accumulations 60.00%

Actual Accumulations 40.00%

Funding Floor 20.00%

0.00% I I I I II I I I I I I I I I I

-,O, "q

,cp N

Cp0, le Ip Ip Sp zIp Ip Ip Ip IpIp

,66 -,N N' ,b , PK5b f q, N

'PI 'PI , p 'p, p 01 lb 'lb N rlb b A Exhibit 3.4

PUBLIC SERVICE COMPANY OF NEW MEXICO PALO VERDE UNIT 3 (000) pundlu3 Plan Fuudhlo Flwor Curve Actual Fundlng Y= Fund S Est Costs %Funded Cri~ Sim FundS Esl. Cos  % Fumnd 1991 1,097 30.306 3.62% 80% 2.90% 373 1,097 30,306 3.62%

1992 3,403 46.867 7.62% 30% 6.10% 2,722 2,335 46,867 4.98%

1993 5,S95 49.211 11.98% 80% 9.58% 4,716 3,692 49,211 7.50%

1994 6.712 51.671 12.99h 80% 10.39%h 5.370 4,117 51,671 7.970/.

199S 7.799 53,63 14.48% 80% 1 1.58% 6,239 4.235 53.863 7.86%

1996 9.009 56,556 15.93% 80% 12.74% 7,208 9,007 56,556 15.93%

1997 10.238 59,384 17.24% 80% 13.79% S,190 10,228 59,384 17.22%

1998 11.992 64,372 18.63% S0% 14.90'h 9,594 11,639 64,372 18.16%

1999 13,903 67,590 20.57% S0% 16.46% 11,123 16,377 67,590 24.23%

2000 16.309 70,970 22.93% 30%A 18.38% 13,047 18,332 70,970 25.83%

2001 17,703 69,668 25.41% 30% 20.33% 14,162 18,985 69,668 27.25%

2002 20.380 73.151 27.86% 30% 22.29% 16,304, 20,579 73,151 28.13%

2003 23.296 76,808 30.33% 80% 24.26% 18,637 23,094 76,808 30.07%

2004 2005 26,461 29.909 80.649 84,681 32.81%

35.32%

= 80'% 26.25%

30%/ 28.26%

21,169 23.928 27,665 80,649 34.30t)i° 2006 33,646 SS,915 37.84% S1% 30.65% 27,253 2007 37,631 93,361 40.36%h 82% 33.100% 30,898 2008 42,035 98,029 42.88% 83% 35.59'h 34,889 2009 46,54 102,931 45.52% 84% 38.24% 39,357 2010 51,964 108,077 48.08% 85% 40.837 44,169 2011 57,421 113,481 50.60% 36% 43.52% 49,332 2012 63,522 119,155 53.31% 87% 46.33% 55,264 2013 70,063 125.113 S6.00%h 88% 49.23% 61,656 2014 77,061 131,369 58.66% W9A 52.21% 63,584 2015 S4.555 137,937 61 30%A 90h 55.17% 76,100 2016 92,563 144,834 63.91% 91% 58.16% 84.233 2017 101,S10 152,075 66.75% 92% 61.41% 93,390 2018 111,057 159,679 69.55% 93% 64.68% 103,283 2019 121,237 167,663 72.31% 94% 67.97% 113,963 2020 132,0S8 176,046 75.03% 95.% 71.28% 125,4S3 2021 143,646 184,849 77.71% 96% 74.60% 137,900 2022 156,243 194,091 80.50%h 97% 78.09'h 151,556 2023 169,415 203,796 83.13% 98% S1.47% 166,027 2024 183,193 213,985 85.61% 99h 84.75% I18,361 2025 193,312 224,077 86.27% 100, 86.27% 193,312 2026 194,478 221.906 87.64% 100% 87.64% 194,478 2027 177,912 199.878 S9.01% 100% S9.01% 177,912 2028 149,907 165,844 90.39'h 100'h 90.39'h 149.907 2029 114,916 125,235 91.76% 100%4 91.76% 114,916 2030 85,S60 91,871 93.13% 100'h 93.13% 85,560 2031 5 1,903 54,91 94.51% 100% 94.51% 51.903 2032 22,291 23,249 95.81% 100'h 95.S8% 22,291 2033 1,022 1,051 97.25% 100% 97.25% 1,022 2034 22,923 23,242 93.63% 100'h 98.63% 22,923 2035 23,418 23,418 100.00'h 100'h 100.00'h 23,418 2036 31,357 31,357 100.00% 100'h 100.00'h 31,357 2037 14,117 14,117 100.00%A 100'A 100.00% 14,117 Exhibit 3.4

Public Service Company of New Mexico Palo Verde Unit 3 120.00% -

2004 Funding Status S($000) Percent 100.00% Committed $26,461 32.81%

Actual $27,665 34.30%

Floor $21,169 26.25%

80.00%

Committed Accumulations 60.00%

40.00% Actual Accumulations Funding Floor 20.00%

0.0 I0% I I I I Il I I I I I I I i i I I I I I SP SO (I:b 'N 'lb 'lb e 11\ "N Nb - , 'b NA , N Cb N lb b A cb N A Nc§?, Nq "q NI:P le IfP Ip IV ep CP Ip Ip 4, 'P, , 41 'O, 'Orp P bb Pn, Exhibit 3.4

PUBLIC SERVICE COMPANY OF NEW MEXICO PALO VERDE UNITS 1. 2,3 (SThouwands) 2001 TLG Cost study Funding Plan Ftndt Floor Curve Atual Funding Year Fund S Est. Costs %Funded CrIteria Peirent SAmount Fund S Est. Cost %Funded 1991 3,288 87.551 3.76% 80%h 3.00%h 2,630 3,289 87,551 3.76/

1992 10.279 136,341 7.54%/ 80/o 6.03% 8,223 7,003 136,341 5.14%

1993 17,812 143,159 12.44% 80°h 9.95% 14,250 11.074 143,159 7.74%

1994 20,275 150,316 13.49% 80/ 10.79h 16,220 12,351 150,316 8.22%/

1995 22,164 147,525 15.02% 80% 12.02%. 17,731 12,705 147,525 8.61%

1996 25.601 154,901 16.53% 80% 13.22% 20,481 25,581 154,901 16.51%

1997 29.095 162,646 17.89% 80% 14.31% 23.276 30,594 162,646 18.81%

1998 35,022 181,1 14 19.34% 80° 15.47% 28,018 40,312 181,114 22.26%

1999 40,610 190,169 21.35% 80% 17.08% 32,488 51,77,3 190,169 27.22'h 2000 47,633 199,678 23.86% 80%h 19.08% 38,107 55,901 199,678 28.00%h 2001 53,088 201,161 26.39% 80% 21.11% 42,470 57,284 201,161 28.48/.

2002 61,111 211.219 28.93% 80%h 23.15% 48,889 61,965 211.219 29.34%

2003 69.862 221,780 31.50%/ 80%,S 25.20/ 55.890 74,418 221,780 33.55%

79,352 89,682

= 232.869 34.08% 80% 27.26% 63.482 = 87.772 232,869 37.69%° 2005 244,512 36.68% 80°h 29.34%6 71,745 0 2006 100.897 256,738 39.30% 81% 31.83% 81,726 0 2007 113,000 269,575 41.92% 82% 34.370 92,660 0 2008 126.(KI 283,054 U.54% 83% 36,97/ 104.631 0 2009 140,503 297,206 47.27% 84% 39.71% 118,022 0 2010 155,835 312,067 49.94% 85% 42.45% 132,459 0 2011 172,206 327,670 52.55% 86% 45.20%h 148.097 0 2012 190,501 344,053 55.37% 87% 48.17%/ 165,736 0 2013 210,111 361,256 58.16% 88% 51.18° 184,898 0 2014 231,104 379,319 60.93% 89% 54.22°/ 205,683 0 2015 253,580 398,285 63.67% 90% 57.30h 228,222 0 2016 277,599 418,199 66.38% 91% 60.41% 252,615 0 2017 304,410 439.109 69.32% 92°/ 63.78°h 280,058 0 2018 333,040 461,065 72.23% 93% 67.18%/ 309,727 0 2019 363,561 484,118 75.10%/0 94% 70.59% 341,748 0 2020 396,099 508,324 77.92% 95% 74.03% 376,294 0 2021 430.786 533.740 80.71% 96% 77.48%/s 413.555 0 2022 468,549 560.427 83.61% 97% 81.10°h 454,493 0 2023 507,114 586,650 86.44% 98°A 84.71% 496,972 0 2024 547.833 614,058 89.22/o 99% 88.3r2 542,355 0 2025 564,210 626,662 90.03% 100% 90.03% 564,210 0 2026 505,777 555,737 91.01% 100% 91.01% 505,777 0 2027 439,719 477.285 92.13% 100% 92.13% 439.719 0 2028 350,639 376,066 93.24% 100% 93.24% 350,639 0 2029 258,574 274,023 94.36% 100°h 94.36% 258,574 0 2030 198.252 207,483 95.55% 100% 95.55% 198,252 0 2031 128.766 132,955 96.85% 100°h 96.85% 128,766 0 2032 75,229 76.649 98. 15% 10h0 98.15% 75.229 0 2033 39,173 39.202 99.93% 100%' 99.93% 39.173 0 2034 55.093 55,411 99.43% 100/6 99.43% 55.093 0 2035 46,344 46,344 100.00°h 100%6 100.00% 46.344 0 2036 94,071 94,071 100.00h 100% 100.00%/ 94,071 0 2037 42.35 1 42,351 100.00 100I 100,00h' 42,351 0 Exhibft 3.4

Public Service Company of New Mexico Palo Verde Units 1,2, and 3 120.00% -

2004 Funding Status

$(S000) Percent 100.00% Committed $79,352 34.08%

Actual $87,772 37.69%

Floor $63,482 27.26%

80.00%

Committed Accumulations 60.00%

Actual Accumulations 40.00%-

20.00% Funding Floor 0.00% 1 1 1 1 1 1 1 1 1 i 1 i 1 1 f  !  ! d l 1 t i 1 r 1 1 1 1 ii i  ; i i i i i i i i ! i i 1 45P Fb lb 4) ,b N I A I 1 $p1 Nq IIq If, e T,C.3O IDIRP ID Exhibit 3.4

Palo Verde Nuclear Generating Station Appendix B, Tab 6 Units 1, 2, & 3 SCPPA 2004 Annual Funding Status Report Section 2.1.7 [Restated]

Summary of Major Assumptions Escalation Factor 6.00%

Rate of Return 6.83%

Participation Ratio 5.91%

Funding Period 35 years for each unit Funding Level Includes Independent Spent Fuel Storage Installation and Non-Nuclear Demolition Costs.

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY Palo Verde Project - Termination Cost FUnding

.UNITI UNIT12 UNIT 3 GRAND TOTAL pFRK)I) CONlTKIOtlMON INTERtiS% BALAE pER101 CO)NWIBITION DAIWE PERIOD CONTRll 'rrlN ItNEMLSr BAL CONTRIR9tTION lWFT TMA DEC31. 1990 10 $14,237,604 $14,387,900 S15,396,791 $44,022,295 JUN 30, 1991 11 so S625,326 14,862,930 so $1,117,240 15,505,140 $0 $1,440,621 16,837,412 S0 $3,183,187 47,205,482 DEC31. 1991 12 0 363,880 15,226,810 0 443.094 15,948,234 0 385,474 17,222.886 0 1,192.448 48,397.930 JUN 30, 1992 13 0 -29,039 15.197,771 0 147,301 16.095,535 0 297,481 17,520,367 0 415,743 48,813,673 DEC31, 1992 14 0 563,854 15,761,625 0 623,452 16,718,987 0 933,298 18.453,665 0 2,120,604 50,934,277 JUN 30. 1993 Is 0 791,974 16,553,599 0 711,934 17,430,921 0 1,081.178 19,534,843 0 2,585,086 53,519,363 DEC31, 1993 16 0 264.949 7.103,347 0 593,006 7.962,403 0 168.679 7,830,305 0 1,026,634 22,896,055 JUN 30, 1994 17 0 229.682 7,333,029 0 -345,413 7,616,990 0 -153,556 7,676,749 0 -269,287 22.626,768 DEC31. 1994 18 0 16,871 7,349,900 0 9,010 7,626,000 0 -12,449 7.664,300 0 13.432 22,640,200 JUN 30, 1995 19 0 486,265 7,836,165 0 609,810 8235,810 0 578,102 8,242,402 0 1,674,177 24,314,377 DEC 31, 1995 20 1,240,620 302,795 9,379,580 1,280.640 233,314 9,749,764 1,480,740 261,846 9,984,988 4.002,000 797,955 29,114,332 JUN 30. 1996 21 1,240,620 244,149 10,864,349 1,280,640 132,669 11,163,073 1,480,740 -19,451 11,446,277 4,002.000 357,367 33,473,699 DEC 31, 1996 22 1,239,380 440,971 12,544,700 1,279,360 453,967 12,896,400 1.479,260 411,663 13.337,200 3,998,000 1,306.601 38,778,300 JUN 30, 1997 23 1,240,620 670,975 14,456295 1,276,640 686,710 14,859,750 1,480,740 682,114 15,500,054 3,998,000 2,039,799 44,816,099 DEC 31, 1997 24 1,654.160 206,445 16,316,900 1,703,520 191,930 16,755,200 1,974,320 142,126 17,616,500 5,332,000 540,501 50,688,600 JUN 30, 1998 25 827.080 587,713 17,731,693 853,760 540,181 18,149,141 987,160 726,204 19,329,864 2,668,000 1,854,098 55,210,698 DEC 31, 1998 26 1,240,620 657,875 19,630,188 1,276,640 594,163 20,019,944 1,480,740 593,888 21,404,492 3,998.000 1,845,926 61,054,624 JUN 30, 1999 27 1,239,380 216,183 21,085,751 1,283,360 390,702 21,694.006 1,479,260 366.650 23,250,402 4,002,000 973,535 66,030,159 DEC 31, 1999 28 1,239,380 475.616 22,800,747 1,3 19,340 264,784 23,278.130 1,439,280 471,854 25,161.536 3.998,000 1,212,254 71,240.413 JUN 30, 2000 29 1,241.860 663,212 24,705,819 1,321.980 689,334 25,289,444 1,442,160 731,960 27,335,656 4,006,000 2.084,506 77,330,919 DEC 31, 2000 30 I,240.620 1,274.719 27,221.158 1,320,660 1,173,453 27.783,557 1,440,720 1,340.511 30,116,887 4,002,000 3,788,683 85,121,602 JUN 30. 2001 31 1,240,620 693,350 29,155,128 1,320,660 872,649 29,976,866 1,440,720 800,274 32,357.881 4,002,000 2,366,273 91,489,875 DEC31, 2001 32 1,240,620 1,156,378 31,552,126 1,320,660 1,103,203 32,400,729 1,440,720 1,419,469 35,218.070 4,002,000 3,679,051 99,170,925 JUN 30. 2002 33 1,240.620 713,427 33,506,173 1,320,660 580,967 34,302,356 1.440.720 821,429 37.480,219 4,002,000 2,115,822 105,288.748 DEC 31. 2002 34 1,240,620 1.006,809 35,753,602 1,320,660 892,072 36,515,088 1,440,720 1,110,978 40,031,917 4,002,000 3.009,859 112,300,607 JUN 30, 2003 35 1240,620 520.171 37,514,393 1,320,660 539,457 38,375,205 1,440,720 656,148 42,128,785 4.002,000 1,715,776 118.018,383 DEC 31. 2003 36 1,240.620 524,746 39,279.759 1,320,660 514,822 40,210,687 1,440.720 602307 44,171,813 4,002,000 1,641,876 123,662,258 JUN 30, 2004 37 1,240.620 1,341.404 40.704,872 1,320,660 1,373.195 41,627,698 1,440,720 1,508,467 45,811,926 4,002.000 4,223,066 128,144.497 lDFEC31 2004 38 0 1.390.07 1 41.831.572 0 1,42 1,586 42,598,008 0 1,564,477 46,984,800 - 4,376,135 131,414,381 JUN 30, 2005 39 (219,415) 1,428,548 43,040,705 (92,915) 1,454,722 43.959,815 (292,981) 1,604,531 48,296,351 (605,311) 4,487,801 135,296,871 DEC 31. 2005 40 (219,415) 1,469,840 44291.130 (92,915) 1,501228 45,368,128 (292.98I) 1,649,320 49,652,690 (605,311) 4,620,388 139,311,948 JUN 30. 2006 41 (219,415) 1.512,542 45.584,256 (92,915) 1.549,322 46,824,534 (292,981) 1,695,639 51.055,349 (605,311) 4,757,503 143,464,139 DEC 31, 2006 42 (219,415) I,556,702 46,921,543 (92,915) 1,599,058 48,330,677 (292,981) 1,743,540 52,505,908 (605,311) 4,899,300 147,758,128 JUN 30, 2007 43 (219,415) 1,602,371 48,304,499 (92,915) 1,650,493 49,888,254 (292,981) 1.793.077 54,006,004 (605,311) 5,045,940 152,198,757 DEC 31, 2007 44 (219,415) 1.649,599 49,734,682 (92,915) 1,703,684 51,499,023 (292.981) 1,844,305 55,557,329 (605,311) 5,197,588 156,791,034 JUN 30, 2008 45 (219.415) 1.698,439 51,213,706 (92,915) 1,758,692 53,164,800 (292,981) 1,897,283 57,161,631 (60S,311) 5,354.414 161,540,136 DEC 31, 2008 46 (219.415) 1.74S,948 52,743,238 (92,915) 1,S15,578 54,887,462 (292,981) 1,952,070 58,820,720 (605,31I) 5,516,596 166,451,421 JUN 30, 2009 47 (219,415) ,801,I82 54,325,005 (92,915) 1,874,407 56,668,954 (292,981) 2,008,728 60,536,467 (605,311) 5,684,316 171,530,426 DEC 31, 2009 48 (219,415) 1,855,199 55,960,788 (92,915) 1,935,245 58,5 1,284 (292,98 1) 2,067,320 62,310,806 (603,311) 5,857,764 176.782,878 Page 10

Palo Verde Project - Termination Cost Funding UNIT I UNIT2 UNIT 3 GRAND TOTAL PEDR) CODNTRMMON INTERSE BAIAiIE PRO CONT0MIM NTERST HAtAM E 1ERMIN INEBMSI TOAI JUN 30, 2010 49 (219.415) 1,911,061 57,652,434 47 (92,915) 1.99I.160 60,416,529 45 (292,981) 2,127,914 64,145,740 (605,311) 6,037,135 182,214.703 DEC31. 2010 50 (219,415) 1,968.831 59,401,849 48 (92,915) 2,063,224 62,386,838 46 (292,981) 2,190,577 66,043,336 (605,311) 6,222,632 187,832.023 JUN 30, 2011 St (219,415) 2.028,573 61.211.007 49 (92.915) 2,130,511 64.424,434 47 (292,981) 2,255,380 68,005,735 (605,311) 6,414,464 193,641,176 DEC31, 2011 52 (219.415) 2,090,356 63,081.947 50 (92,915) 2200,094 66,531.613 48 (292,981) 2,322,396 70,035,151 (605,311) 6,612,846 I99,648,711 JtN 30, 2012 53 (219,415) 2,154,248 65.016,780 51 (92,915) 2,272,055 68.710,753 49 (292.981) 2,391,700 72,133,870 (605.311) 6,818,003 205,861,403 DEC 31, 2012 54 (219,415) 2,220.323 67.017,688 52 (92,915)

• 2,346,472 70,964,310 50 (292,981) 2,463,372 74,304,261 (605,311) 7,030.167 212,286,259 JUN 30, 2013 55 (219,415) 2,288,654 69,086,926 53 (92,915) 2,423,431 73,294,826 51 (292,981) 2,537,491 76,548.771 (605,311) 7,249,576 218,930.523 DEC 31. 2013 56 (219,415) 2.359,319 71,226,830 54 (92,915) 2,503,01S 75,704.929 52 (292,981) 2,614,141 78,869,931 (605,311) 7,476,477 225,801,689 JUN 30, 2014 57 (219,415) 2,432,396 73,439,810 55 (92,915) 2,585,323 78,197,337 53 (292,981) 2,693,408 81,270,358 (605,311) 7,711,128 232.907,506 DEC31. 2014 58 (219,415) 2,507,970 75.728,365 56 (92,915) 2,670,439 80,774,861 54 (292,98 1) 2,775,383 83,752,760 (605,311) 7,953,791 240,255,986 JUN 30, 2015 59 (219,415) 2,586,124 78,095,073 57 (92,915) 2,758,462 83,440,408 55 (292,981) 2,860.157 86,319,936 (605.311) 8,204,742 247,855,417 DEC 31, 2015 60 (219,415) 2,666,947 80,542,604 5R (92,915) 2,849,490 86,196,983 56 (292,981) 2,947,826 88,974,781 (605,311) 8,464,262 255,714,368 JUN 30, 2016 61 (219,415) 2,750,530 83,073,719 59 (92,915) 2.943.627 S9,047,694 57 (292,9S1) 3,038,489 91,720.290 (6053!1) 8,732.646 263,841,703 DEC31. 2016 62 (219,415) 2.836,967 85,691,271 60 (92,915) 3,040,979 91,995,758 58 (292.981) 3,132,248 94,559,557 (605,311) 9,010,194 272,246,586 JUN 30, 2017 63 (219.415) 2,926,357 88,398,212 61 (92.915) 3.141,655 95,044,498 59 (292,981) 3,229,209 97,495,785 (605,311) 9,297,221 280,938,495 DEC31. 2017 64 (219.415) 3,018.799 91.197.596 62 (92,915) 3,245,770 98,197,353 60 (292,981) 3,329,481 100,532,285 (605,311) 9.594,050 289,927,234 JUN 30, 2018 65 (219,415) 3,114,398 94,092,578 63 (92,915) 3,353,440 101.457.877 61 (292.981) 3,433,178 103,672,482 (605,311) 9,901,015 299,222,937 DEC31. 2018 66 (219,415) 3,213,262 97.086,424 64 (92,915) 3,464,787 104,829.749 62 (292,981) 3,540,415 106,919.917 (605,311) 10,218,463 308,836,090 JUN 30, 2019 67 (219,415) 3,315,501 100.182,510 65 (92,915) 3,579,936 108,316,769 63 (292,981) 3,651,315 110,278,251 (605,311) 10.546,752 318,777,531 DEC 31. 2019 68 (219,415) 3,421,233 103,384,328 66 (92.915) 3,699,018 111,922,872 64 (292,981) 3,766,002 113,751,273 (605,311) 10.886,253 329,058,472 JUN 30, 2020 69 (219,415) 3,530,575 106,695.487 67 (92,915) 3,822,166 115,652,123 65 (292,981) 3,884,606 117,342,898 (605,311) 11,237,347 339,690.508 DEC 31, 2020 70 (219,415) 3,643.651 110.119,723 68 (92,915) 3,949,520 119,508,728 66 (292,981) 4,007,260 121,057,177 (605,311) 11,600,431 350,685,628 JUN 30, 2021 69 (92,915) 4,081,223 123.497,036 67 (292,981) 4,134,103 124,898,299 (385,896) 8.215,326 248,395,335 DEC 31, 2021 70 (92,915) 4,217,424 127,621.544 68 (292.981) 4,265,277 128,870.595 (385,896) 8,482,701 256,492.140 JUN 30, 2022 69 (292,981) 4,400,931 132.978,545 (292,981) 4,400,931 132,978,545 DEC31, 2022 70 (292,981) 4,541,217 137,226,782 (292,981) 4,541,217 137,226,782 Page I I

SCPPA PALO VERDE UNIT 1 FUNDING PLAN 100%

90%

80%

70%

D 60%

a z

- 50%

z w

0 0.

30%

20%

10%

0%

1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 YEAR Page 12

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY 2004 PALO VERDE UNIT -1 FUNDING STATUS TERMINATION COST FUNDING (S THOUSAND)

(I) - (2 x 3) (2) (3) (4) (5) = (3 x 4) (6) = (I x 4) (7) (8)= (2) (9) - (7 / 8)

AUTHORIZED FUNDING PLAN FUNDING FLOOR CURVE ACTUAL FUNDING YEAR FUND EST. COST %FUNDED CRITERIA PERCENT AMOUNT FUND EST. COST %FUNDED DEC 1991 $4,225 $16,565 26% 80% 20% $3,380 $15,227 $16,565 92%

DEC 1992 5,176 26,915 19% 80% 15% 4,141 15,762 26,915 59%

DEC 1993 6,782 28,530 24% 80% 19% 5,426 7,103 28,530 25%

DEC 1994 7,597 30,242 25% 80% 20% 6,078 7,350 30,242 24%

DEC 1995 7,190 26,629 27% 80% 21% 5,752 9,380 26,629 35%

DEC 1996 9,033 28,227 32% 80% 25% 7,226 12,545 28,227 44%

DEC 1997 10,771 29,920 36% 80% 29% 8,617 16,317 29,920 55%

DEC 1998 13,181 32,953 40% 80% 32% 10,545 19,630 32,953 60%

DEC 1999 15,369 34,930 44% 80% 35% 12,295 22,801 34,930 65%

DEC 2000 17,032 37,026 46% 80% 37% 13,626 27,221 37,026 74%

DEC 2001 18,562 36,396 51% 80% 40% 14,850 31,552 36,396 87%

DEC 2002 20,833 38,580 54% 80% 43% 16,666 35,754 38,580 93%

DEC 2003 23,310 40,895 57% 80% 46% 18,648 39,280 40,895 96%

IDEC 2004 26,009 43,348 60% 80% 48% 20,807 41,832 43,348 97% 7 DEC 2005 28,948 45,949 63% 81% 51% 23,448 DEC 2006 32,146 48,706 66% 82% 54% 26,360 DEC 2007 35,624 51,629 69% 83% 57% 29,568 DEC 2008 38,856 54,726 71% 84% 60% 32,639 DEC 2009 42,927 58,010 74% 85% 63% 36,488 DEC 2010 46,733 61,490 76% 86% 65% 40,190 DEC 2011 51,492 65,180 79% 87% 68% 44,798 DEC 2012 55,963 69,091 81% 88% 71% 49,248 DEC 2013 60,786 73,236 83% 89% 74% 54,099 DEC 2014 65,986 77,630 85% 90% 77% 59,387 DEC 2015 71,591 82,288 87% 91% 80% 65,147 DEC 2016 77,631 87,225 89% 92% 82% 71,420 DEC 2017 80,431 92,459 91% 93% 85% 74,801 DEC 2018 86,826 98,006 93% 94% 88% 81,616 DEC 2019 93,665 103,887 95% 95% 91% 88,982 DEC 2020 114,288 110,120 100% 100% 100% 114,288 DEC 2021 120,002 115,626 100% 100% 100% 120,002 DEC 2022 126,003 121,407 100% 100% 100% 126,003 DEC 2023 132,303 127,478 100% 100% 100% 132,303 DEC 2024 138,918 133,852 100% 100% 100% 138,918 DEC 2025 145,864 140,544 100% 100% 100% 145,864 Page 13

SCPPA PALO VERDE UNIT 2 FUNDING PLAN 1090% - ----- -

80%-

80%_1 ACTU AL _ J__CC ITT ED_ ___

MIV ____

70%_

w 60% - -------

550% FO-w iLi 40%

a.

Jar .2004 FUNDING STATUS 30% -AMOUNT PERCEN COMMITTED $29,858,000 63%

2 ACTUAL $42,598,000 90%

10% FLOOR $23,886,000 500° 0% . . . . . . . . .

1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 YEAR Page 14

SOUTHERN CALIFORNIA PUBLIC POWVER AUTHORITY 2004 PALO VERDE UNIT - 2 FUNDING STATUS TERMINATION COST FUNDING (S THOUSAND)

(1) -(2x3) (2) (3) (4) (5) -(3x4) (6)=(I x4) (7) (8)-(2) (9)-(718)

AUTHORIZED FUNDING PLAN FUNDING FLOOR CURVE ACTUAL FUNDING YEAR FUND EST. COST %FUNDED CRITERIA PERCENT AMOUNT FUND EST. COST %FUNDED DEC 1991 $3,966 $16,423 24% 80% 19% $3,173 $15,948 $16,423 97%

DEC 1992 4,932 26,483 19% 80% 15% 3,946 16,719 26,483 63%

DEC 1993 6,548 28,072 23% 80% 19% 5,238 7,962 28,072 28%

DEC 1994 8,515 29,756 29% 80% 23% 6,812 7,626 29,756 26%

DEC 1995 8,568 27,640 31% 80% 25% 6,855 9,750 27,640 35%

DEC 1996 10,254 29,298 35% 80% 28% 8,204 12,896 29,298 44%

DEC 1997 12,112 31,056 39% 80% 31% 9,690 16,755 31,056 54%

DEC 1998 14,916 34,689 43% 80% 34% 11,933 20,020 34,689 58%

DEC 1999 17,282 36,770 47% 80% 37% 13,825 23,278 36,770 63%

DEC 2000 19,488 38,976 50% 80% 40% 15,590 27,784 38,976 71%

DEC 2001 21,090 39,793 53% 80% 43% 16,872 32,401 39,793 81%

DEC 2002 24,043 42,180 57% 80% 45% 19,234 36,515 42,180 87%

DEC 2003 26,827 44,711 60% 80% 48% 21,461 40,211 44,711 90%

DEC 2004 29,858 47,394 63% 80% 50% 23,886 42,598 47,394 90%

DEC 2005 33,157 50,237 66% 80% 53% 26,525 DEC 2006 36,211 53,252 68% 81% 55% 29,331 DEC 2007 40,077 56,447 71% 82% 58% 32,863 DEC 2008 44,277 59,834 74% 83% 61% 36,750 DEC 2009 48,202 63,424 76% 84% 64% 40,490 DEC 2010 53,111 67,229 79% 85% 67% 45,144 DEC 2011 57,723 71,263 81% 86% 70% 49,642 DEC 2012 62,697 75,538 83% 87% 72% 54,546 DEC 2013 68,060 80,071 85% 88% 75% 59,893 DEC 2014 73,841 84,875 87% 89% 78% 65,719 DEC 2015 80,971 89,968 90% 90% 81% 72,874 DEC 2016 87,736 95,366 92% 91% 83% 79,840 DEC 2017 95,022 101,088 94% 92% 86% 87,421 DEC 2018 101,795 107,153 95% 93% 89% 94,670 DEC 2019 110,175 113,582 97% 94% 91% 103,564 DEC 2020 119,193 120,397 99% 95% 94% 113,233 DEC 2021 127,621 127,621 100% 100% 100% 127,621 DEC 2022 134,002 134,002 100% 100% 100% 134,002 DEC 2023 140,702 140,702 100% 100% 100% 140,702 DEC 2024 147,737 147,737 100% 100% 100% 147,737 DEC 2025 155,124 155,124 100% 100% 100% 155,124 DEC 2026 162,880 162,880 100% 100% 100% 162,880 Page 15

SCPPA PALO VERDE UNIT 3 FUNDING PLAN 100%

90%

80%

70%

aw 60%

a z

50%

zus Iit a- 40%

30%

20%

10%

0%

1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 YEAR Page 16

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY 2004 PALO VERDE UNIT -3 FUNDING STATUS TERMINATION COST FUNDING (S THOUSAND)

(I) - (2 x 3) (2) (3) (4) (5) - (3 x 4) (6)- (I x4) (7) (8) - (2) (9) = (7 / S)

AUTHORIZED FUNDING PLAN FUNDING FLOOR CURVE ACTUAL FUNDING YEAR FUND EST. COST %FUNDED CRITERIA PERCENT AMOUNT FUND EST. COST %FUNDED DEC 1991 $3,098 $18,225 17% 80% 14% $2,478 S17,223 $18,225 95%

DEC 1992 4,125 28,298 15% 80% 12% 3,300 18,454 28,298 65%

DEC 1993 5,769 29,996 19% 80% 15% 4,615 7,830 29,996 26%

DEC 1994 8,375 31,796 26% 80% 21% 6,700 7,664 31,796 24%

DEC 1995 9,051 31,209 29% 80% 23% 7,240 9,985 31,209 32%

DEC 1996 10,917 33,082 33% 80% 26% 8,734 13,337 33,082 40%

DEC 1997 12,624 35,066 36% 80% 29% 10,099 17,617 35,066 50%

DEC 1998 14,919 37,298 40% 80% 32% 11,935 21,404 37,298 57%

DEC 1999 17,396 39,536 44% 80% 35% 13,917 25,162 39,536 64%

DEC 2000 19,697 41,908 47% 80% 38% 15,757 30,117 41,908 72%

DEC 2001 20,183 40,366 50% 80% 40% 16,146 35,218 40,366 87%

DEC 2002 22,678 42,788 53% 80% 43% 18,142 40,032 42,788 94%

DEC 2003 25,399 45,355 56% 80% 45% 20,319 44,172 45,355 97%

DEC 2004 28,365 = 48,077 59% 80% = 47% 22,692 46.985 48.077 98%1 DEC 2005 31,596 50,961 62% 80% 49% 25,277 DEC 2006 34,572 54,019 64% 80% 52% 27,658 DEC 2007 38,364 57,260 67% 80% 54% 30,691 DEC 2008 41,880 60,696 69% 81% 56% 33,923 DEC 2009 46,323 64,338 72% 82% 59% 37,985 DEC 2010 50,466 68,198 74% 83% 62% 41,887 DEC 2011 54,940 72,290 76% 84% 64% 46,150 DEC 2012 60,535 76,627 79% 85% 67% 51,455 DEC 2013 65,792 81,225 81% 86% 69% 56,581 DEC 2014 71,461 86,098 83% 87% 72% 62,171 DEC 2015 77,574 91,264 85% 88% 74% 68,266 DEC 2016 84,164 96,740 87% 89% 77% 74,906 DEC 2017 90,239 102,544 88% 90% 80% 81,215 DEC 2018 97,827 108,697 90% 91% 82% 89,023 DEC 2019 106,001 115,219 92% 92% 85% 97,521 DEC 2020 114,804 122,132 94% 93% 87% 106,768 DEC 2021 122,987 129,460 95% 94% 90% 115,608 DEC 2022 137,227 137,227 100% 100% 100% 137,227 DEC 2023 144,089 144,089 100% 100% 100% 144,089 DEC 2024 151,293 151,293 100% 100% 100% 151,293 DEC 2025 158,858 158,858 100% 100% 100% 158,858 DEC 2026 166,801 166,801 100% 100% 100% 166,801 DEC 2027 175,141 175,141 100% 100% 100% 175,141 Page 17

SCPPA PALO VERDE ALL UNITS FUNDING PLAN 90%

70 0

z A Li.

80% - _ A(

TU L __- XCOCMMTED __ ____ __ -- *- CUL $8,2200

---

$3,1,0 6E5 wC.

wa4%. 2004 FUNDING STATUS--

0OX AMOUNT PERCENT COMMITTED $84,232,000 61%

20% -- ACTUAL $131,414,000 95%

FLOOR $67,386,000 48%

10% --- 19-4 1 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 YEAR Page 18

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY 2004 PALO VERDE ALL UNITS FUNDING STATUS TERMINATION COST FUNDING (IN THOUSANDS)

(1) - (2 x 3) (2) (3) (4) (5) -(3x4) (6)=(1 x4) (7) (8) - (2) (9) - (7 / 8)

AUTHORIZED FUNDING PLAN FUNDING FLOOR CURVE ACTUAL FUNDING YEAR FUND EST. COST %FUNDED CRITERIA PERCENT AMOUNT FUND EST. COST %FUNDED DEC 1991 $11,289 $51,213 22% 80% 18% $9,031 $48,398 $51,213 95%

DEC 1992 14,233 81,696 17% 80% 14% 11,386 50,935 81,696 62%

DEC 1993 19,099 86,598 22% 80% 18% 15,279 22,895 86,598 26%

DEC 1994 24,487 91,794 27% 80% 21% 19,590 22,640 91,794 25%

DEC 1995 24,809 85,478 29% 80% 23% 19,847 29,115 85,478 34%

DEC 1996 30,204 90,607 33% 80% 26% 24,163 38,778 90,607 43%

DEC 1997 35,507 96,043 37% 80% 30% 28,406 50,689 96,043 53%

DEC 1998 43,016 104,939 41% 80% 33% 34,413 61,054 104,939 58%

DEC 1999 50,047 111,236 45% 80% 36% 40,037 71,240 111,236 64%

DEC 2000 56,217 117,910 48% 80% 38% 44,973 85,122 117,910 72%

DEC 2001 59,835 116,555 51% 80% 41% 47,868 99,171 116,555 85%

DEC 2002 67,554 123,548 55% 80% 44% 54,043 112,301 123,548 91%

DEC -

2003 75,536 130,961 58% 80% 46% 60,429 123,663 130,961 94%

DEC 2004 84,232 138,819 61% 80% 48% 67,386 131,414 138,819 95%I DEC 2005 93,701 147,148 64% 81% 51% 75,250 DEC 2006 102,929 155,977 66% 82% 54% 83,349 DEC 2007 114,065 165,336 69% 83% 57% 93,122 DEC 2008 125,013 175,256 71% 84% 60% 103,311 DEC 2009 137,452 185,771 74% 85% 63% 114,963 DEC 2010 150,310 196,917 76% 86% 66% 127,222 DEC 2011 164,155 208,732 79% 87% 68% 140,589 DEC 2012 179,196 221,256 81% 88% 71% 155,249 DEC 2013 194,638 234,532 83% 89% 74% 170,574 DEC 2014 211,288 248,603 85% 90% 77% 187,277 DEC 2015 230,136 263,520 87% 91% 79% 206,287 DEC 2016 249,531 279,331 89% 92% 82% 226,166 DEC 2017 265,692 296,091 90% 93% 85% 243,436 DEC 2018 286,448 313,856 91% 94% 87% 265,309 DEC 2019 309,841 332,688 93% 95% 90% 290,067 DEC 2020 348,285 352,649 99% 96% 94% 334,289 DEC 2021 370,610 372,707 99% 97% 95% 363,231 DEC 2022 397,232 392,636 101% 100% 100% 397,232 DEC 2023 417,093 412,268 101% 100% 100% 417,093 DEC 2024 437,948 432,882 101% 100% 100% 437,948 DEC 2025 459,845 454,526 101% 100% 100% 459,845 DEC 2026 329,681 329,681 100% 100% 100% 329,681 DEC 2027 175,141 175,141 100% 100% 100% 175,141 Page 19

Palo Verde Nuclear Generating Station Appendix B, Tab 7 Units 1, 2, & 3 LADWP 2004 Annual Funding Status Report Section 2.1.7 [Restated]

Summary of Major Assumptions Escalation Factor 5.0%

Rate of Return 7.0%

Participation Ratio 5.7%

Funding Period 35 years for each unit Funding Level Includes Water Reclamation Facility and 25% Contingency factor

Department of Water & Power Palo Verde Project Termination Cost Funding I Unit I II Unit 2 1I Unit 3 11 GrandTotal I DatI Period Contnbution Interest Blance eni Contribution Interest Balance IL Period Contribution Interest Balance Contribution Interest Totals 12/31/1990 2,444,200 8 2,159,244 6 1,493,407 0 0 6,096,851 6/30/1991 223,326 106,706 2,774,232 9 232,478 105,780 2,497,502 7 270,890 71,900 1,836,197 726,694 284,386 7,107,931 12/31/1991 223,326 428,941 3,426,499 10 232,478 490,438 3,220,418 8 270,890 432,437 2,539,524 726,694 1,351,816 9,186,441 6/30/1992 223,326 116,869 3,766,694 11 232,478 111,934 3,564,830 9 270,890 77,462 2,887,876 726,694 306,265 10,219,400 12/31/1992 434,027 104,872 4,305,593 12 423,694 129,716 4,118,240 10 464,724 84,937 3,437,537 1,322,445 319,525 11,861,370 6/30/1993 445,545 90,854 4,841,992 13 421,072 173,551 4,712,863 11 477,502 111,010 4,026,049 1,344,119 375,415 13,580,904 12/31/1993 431,919 87,753 5,361,664 14 414,884 93,888 5,221,635 12 462,987 52,475 4,541,511 1,309,790 234,116 15,124,810 6/30/1994 431,919 111,532 5,905,115 15 414,884 10,343 5,646,862 13 462,987 47,978 5,052,476 1,309,790 169,853 16,604,453 12/31/1994 431,919 (131,334) 6,205,700 16 414,884 (120,146) 5,941,600 14 462,987 (159,863) 5,355,600 1,309,790 (411,343) 17,502,900 6/30/1995 431,919 404,898 7,042,517 17 414,884 339,916 6,696,400 15 462,987 295,915 6,114,502 1,309,790 1,040,729 19,853,419 12/31/1995 1,755,562 262,538 9,060,617 18 1,669,739 235,585 8,601,724 16 1,884,499 181,886 8,180,887 5,309,800 680,009 25,843,228 6/30/1996 1,755,562 260,302 11,076,481 19 1,669,739 197,615 10,469,078 17 1,884,499 152,131 10,217,517 5,309,800 610,048 31,763,076 12/31/1996 1,593,396 258,223 12,928,100 20 1,753,112 211,610 12,433,800 18 1,963,492 150,991 12,332,000 5,310,000 620,824 37,693,900 6/30/1997 1,593,396 247,064 14,768,560 21 1,753,112 238,202 14,425,114 19 1,963,492 184,812 14,480,304 5,310,000 670,078 43,673,978 12/31/1997 1,593,396 565,873 16,927,829 22 1,753,112 583,850 16,762,076 20 1,963,492 399,527 16,843,323 5,310,000 1,549,250 50,533,228 6/30/1998 1,593,396 738,933 19,260,158 23 1,753,112 794,564 19,309,752 21 1,963,492 549,326 19,356,141 5,310,000 2,082,823 57,926,051 12/31/1998 1,593,396 996,208 21,849,762 24 1,753,112 653,844 21,716,708 22 1,963,492 511,371 21,831,004 5,310,000 2,161,423 65,397,474 6/30/1999 1,629,218 (214,470) 23,264,510 25 1,750,953 113,871 23,581,532 23 1,929,829 (245,280) 23,515,553 5,310,000 (345,879) 70,361,595 12/31/1999 0 211,345 23,475,855 26 0 346,764 23,928,296 24 0 316,063 23,831,616 0 874,172 71,235,767 6/30/2000 0 852,897 24,328,752 27 0 804,598 24,732,894 25 0 778,362 24,609,978 0 2,435,856 73,671,623 12/31/2000 0 1,765,642 26,094,394 28 0 1,536,294 26,269,187 26 0 1,623,514 26,233,492 0 4,925,450 78,597,074 6/30/2001 0 1,044,753 27,139,147 29 0 951,085 27,220,272 27 0 1,117,369 27,350,861 0 3,113,207 81,710,280 12/31/2001 0 875,812 28,014,959. 30 0 971,149 28,191,422 28 0 1,069,950 28,420,811 0 2,916,911 84,627,192 6/30/2002 0 766,833 28,781,792 31 0 764,694 28,956,116 29 0 687,677 29,108,488 0 2,219,205 86,846,396 12/31/2002 0 1,140,274 29,922,067 32 0 1,152,070 30,108,186 30 0 832,779 29,941,267 0 3,125,123 89,971,520 6/30/2003 0 538,487 30,460,554 33 0 697,317 30,805,503 31 0 600,265 30,541,532 0 1,836,069 91,807,589 12/31/2003 0 300,726 30,761,280 34 0 133,416 30,938,919 32 0 159,788 30,701,320 0 593,930 92,401,519 6/30/2004 _ .

0 64,765 30,826,045 35 0 44,503 30,983,422 33 0 69,003 30,770,323 0 178,271 92,579,789 12/31/2004 _

0 941,281 31,767,326 = 36 0 (3,237) 696,407 1,108,794 31,679,829 32,785,386 34 35 0

(14,657) 963,229 1,110,674 31,733,552 32,829,569 0 2,600,917 (136,697) 3,331,325 95,180,707 98,375,334 6/30/2005 (118,803) 1,111,856 32,760,379 37 12/31/2005 (118,803) 1,146,613 33,788,189 38 (3,237) 1,147,489 33,929,638 36 (14,657) 1,149,035 33,963,947 (136,697) 3,443,137 101,681,774 6/30/2006 (118,803) 1,182,587 34,851,972 39 (3,237) 1,187,537 35,113,938 37 (14,657) 1,188,738 35,138,028 (136,697) 3,558,862 105,103,938 12/31/2006 (118,803) 1,219,819 35,952,988 40 (3,237) 1,228,988 36,339,689 38 (14,657) 1,229,831 36,353,202 (136,697) 3,678,638 108,645,879 6/30/2007 (118,803) 1,258,355 37,092,539 41 (3,237) 1,271,889 37,608,341 39 (14,657) 1,272,362 37,610,907 (136,697) 3,802,606 112,311,788 12/31/2007 (118,803) 1,298,239 38,271,975 42 (3,237) 1,316,292 38,921,397 40 (14,657) 1,316,382 38,912,632 (136,697) 3,930,913 116,106,003 6/30/2008 (118,803) 1,339,519 39,492,691 43 (3,237) 1,362,249 40,280,408 41 (14,657) 1,361,942 40,259,917 (136,697) 4,063,710 120,033,016 Page 10

Department of Water & Power Palo Verde Project Termination Cost Funding I Unit I I Unit 2 . Unit 3 _ Grand Total DM Period Contribution note DBalance PeAd Contfribution Interest Balance [ Period Contribution Interest Balance Contribution Interest Totals 12/31/2008 46 (118,803) 1,382,244 40,756,131 44 (3,237) 1,409,814 41,686,986 42 (14,657) 1,409,097 41,654,357 (136,697) 4,201,156 124,097,474 6/30/2009 47 (118,803) 1,426,465 42,063,793 45 (3,237) 1,459,045 43,142,793 43 (14,657) 1,457,902 43,097,602 (136,697) 4,343,412 128,304,189 12/31/2009 48 (118,803) 1,472,233 43,417,222 46 (3,237) 1,509,998 44,649,554 44 (14,657) 1,508,416 44,591,361 (136,697) 4,490,647 132,658,138 6/30/2010 49 (118,803) 1,519,603 44,818,022 47 (3,237) 1,562,734 46,209,052 45 (14,657) 1,560,698 46,137,402 (136,697) 4,643,035 137,164,476 12/31/2010 50 (118,803) 1,568,631 46,267,849 48 (3,237) 1,617,317 47,823,132 46 (14,657) 1,614,809 47,737,554 (136,697) 4,800,757 141,828,535 6/30/2011 51 (118,803) 1,619,375 47,768,421 49 (3,237) 1,673,810 49,493,704 47 (14,657) 1,670,814 49,393,712 (136,697) 4,963,999 146,655,837 12/31/2011 52 (118,803) 1,671,895 49,321,512 50 (3,237) 1,732,280 51,222,747 48 (14,657) 1,728,780 51,107,834 (136,697) 5,132,954 151,652,094 6/30/2012 53 (118,803) 1,726,253 50,928,962 51 (3,237) 1,792,796 53,012,307 49 (14,657) 1,788,774 52,881,952 (136,697) 5,307,823 156,823,220 12/31/2012 54 (118,803) 1,782,514 52,592,672 52 (3,237) 1,855,431 54,864,500 50 (14,657) 1,850,868 54,718,163 (136,697) 5,488,813 162,175,335 6/30/2013 55 (118,803) 1,840,744 54,314,612 53 (3,237) 1,920,258 56,781,521 51 (14,657) 1,915,136 56,618,642 (136,697) 5,676,137 167,714,775 12/31/2013 56 (118,803) 1,901,011 56,096,821 54 (3,237) 1,987,353 58,765,637 52 (14,657) 1,981,652 58,585,637 (136,697) 5,870,017 173,448,095 6/30/2014 57 (118,803) 1,963,389 57,941,406 55 (3,237) 2,056,797 60,819,198 53 (14,657) 2,050,497 60,621,477 (136,697) 6,070,683 179,382,081 12/31/2014 58 (118,803) 2,027,949 59,850,552 56 (3,237) 2,128,672 62,944,633 54 (14,657) 2,121,752 62,728,572 (136,697) 6,278,373 185,523,757 6/30/2015 59 (118,803) 2,094,769 61,826,518 57 (3,237) 2,203,062 65,144,458 55 (14,657) 2,195,500 64,909,415 (136,697) 6,493,331 191,880,391 12/31/2015 60 (118,803) 2,163,928 63,871,643 58 (3,237) 2,280,056 67,421,277 56 (14,657) 2,271,830 67,166,587 (136,697) 6,715,814 198,459,507 6/30/2016 61 (118,803) 2,235,507 65,988,347 59 (3,237) 2,359,745 69,777,785 57 (14,657) 2,350,831 69,502,761 (136,697) 6,946,083 205,268,893 12/31/2016 62 (118,803) 2,309,592 68,179,136 60 (3,237) 2,442,222 72,216,770 58 (14,657) 2,432,597 71,920,701 (136,697) 7,184,411 212,316,607 6/30/2017 63 (118,803) 2,386,270 70,446,602 61 (3,237) 2,527,587 74,741,121 59 (14,657) 2,517,225 74,423,268 (136,697) 7,431,081 219,610,991 12/31/2017 64 (118,803) 2,465,631 72,793,430 62 (3,237) 2,615,939 77,353,823 60 (14,657) 2,604,814 77,013,426 (136,697) 7,686,385 227,160,679 6/30/2018 65 (118,803) 2,547,770 75,222,397 63 (3,237) 2,707,384 80,057,970 61 (14,657) 2,695,470 79,694,238 (136,697) 7,950,624 234,974,605 12/31/2018 66 (118,803) 2,632,784 77,736,378 64 (3,237) 2,802,029 82,856,762 62 (14,657) 2,789,298 82,468,880 (136,697) 8,224,111 243,062,019 6/30/2019 67 (118,803) 2,720,773 80,338,348 65 (3,237) 2,899,987 85,753,512 63 (14,657) 2,886,411 85,340,633 (136,697) 8,507,171 251,432,493 12/31/2019 68 (118,803) 2,811,842 83,031,386 66 (3,237) 3,001,373 88,751,648 64 (14,657) 2,986,922 88,312,899 (136,697) 8,800,137 260,095,933 6/30/2020 69 (118,803) 2,906,099 85,818,682 67 (3,237) 3,106,308 91,854,718 65 (14,657) 3,090,951 91,389,193 (136,697) 9,103,358 269,062,593 12/31/2020 70 (118,803) 3,003,654 88,703,533 68 (3,237) 3,214,915 95,066,397 66 (14,657) 3,198,622 94,573,158 (136,697) 9,417,191 278,343,087 6/30/2021 69 (3,237) 3,327,324 98,390,484 67 (14,657) 3,310,061 97,868,561 (17,894) 6,637,384 196,259,045 12/31/2021 70 (3,237) 3,443,667 101,830,913 68 (14,657) 3,425,400 101,279,304 (17,894) 6,869,067 203,110,217 6/30/2022 69 (14,657) 3,544,776 104,809,423 (14,657) 3,544,776 104,809,423 12/31/2022 70 (14,657) 3,668,330 108,463,096 (14,657) 3,668,330 108,463,096 0

Page 11

DWP PALO VERDE UNIT 1 FUNDING PLAN 10COMMnTD FLOOR A 90% 1 70%-

60% -

40% --

U 40%/X,1rt__

2004 FUNDING STATUS 30% -AMOUNT PERCENT 20%. COMMIllED 22,350 55%

ACWAL 31,767 78%

10/ - _ __-lFLOOR 17,880 44%

1991 1994

--- 1997 2MM00

_VVV VW 200? 2DM

_VVV 2009 2012 2015 2018 2021 2024 Year Page 12

DEPARTMENT OF WATER & POWER 2001 PALO VERDE UNIT 1 FUNDING STATUS TERMINATION COST FUNDING (In Thousand $)

(1) 2 (3) (4) (5) (6) (7) (8) (9)

Authorized Funding Plan Funding Floor Curve Actual Funding Month Y&K Eu-nd EstCost  % Funded Criteri Perent A Eimd Est Cost  % Funded (2) X (3) (3) X (4) (1) X (4) (7)/(8)

DEC 1991 3,261 15,677 21% 800/a 17% 2,609 3,426 15,677 22%

DEC 1992 4,330 25,832 17% 80% 13% 3,464 4,306 25,832 17%

DEC 1993 5,513 27,124 20% 80/ 16% 4,410 5,362 27,124 20%

DEC 1994 6,780 28,480 24% 800/ 19% 5,424 6,206 28,480 22%

DEC 1995 6,934 25,682 27% 800/ 22% 5,547 9,061 25,682 35%

DEC 1996 8,3S9 26,966 31% 8W0/o 25% 6,688 12,928 26,966 48%

DEC 1997 9,627 28,314 34% 800/ 27% 7,702 16,928 28,314 60%

DEC 1998 11,759 31,782 37% 800/ 300/a 9,407 21,850 31,782 69%

DEC 1999 13,348 33,371 40% 800/ 32% 10,679 23,476 33,371 70%/a DEC 2000 15,067 35,040 43% 800/ 34% 12,054 26,094 35,040 74%

DEC 2001 16,924 36,792 46% 800/ 37% 13,539 28,015 36,792 76%

DEC 2002 18,060 36,858 49% 800/c 39% 14,448 29,922 36,858 81%

DEC 2003 20,124 38,701 52NO 800/ 42% 16,100 30,761 38,701 79%

DEC 2004 22,350 40,636 55% 800/a 44% = 17,880 31,767 40,636 78%I.

DEC 2005 24,747 42,668 58% 81% 47% 20,045 DEC 2006 27,329 44,801 61% 82% 500/0 22,410 DEC 2007 30,106 47,041 64% 83% 53% 24,988 DEC 2008 33,093 49,393 67% 84% 56% 27,799 DEC 2009 35,785 51,863 69% 85% 59% 30,418 DEC 2010 39,208 54,456 72r/ 86% 62% 33,719 DEC 2011 42,884 57,179 75% 87Ya 65% 37,309 DEC 2012 46,829 60,038 780/ 88% 69% 41,210 DEC 2013 51,062 63,040 81% 89% 72% 45,445 DEC 2014 54,939 66,192 83% 900/a 75% 49,445 DEC 2015 59,771 69,501 86% 91% 78% 54,392 DEC 2016 64,949 72,976 89% 92% 820/a 59,753 DEC 2017 70,495 76,625 9r/a 93% 86% 65,560 DEC 2018 75,629 80,456 94% 94% 88% 71,091 DEC 2019 81,945 84,479 97% 95% 92% 77,848 DEC 2020 88,703 88,703 100% 96% 96% 85,155 DEC 2021 93,138 93,138 1000/% 97% 97%- 90,344 DEC 2022 97,795 97,795 100% 98% 98% 95,839 DEC 2023 102,685 102,685 100% 99% 99% 101,658 DEC 2024 107,819 107,819 1000/a 1000/ 100% 107,819 DEC 2025 3,210 113,210 100% 100% 100% 113,210 Page 13

DWP PALO VERDE UNIT 2 FUNDING PLAN

.100% I COMMiITED _ FLOOR -*-ACEL 9 0; - I I 1AX0 70% --

U 40% --- __l --

v4 /2004 FUNDING STATL

/J K or$AMOUNT COMMITTED 23,991 e ACTUAL 31,680 10% FLOOQ 19,193 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 Year Page 14

DEPARTMENT OF WATER & POWER 2001 PALO VERDE UNIT 2 FUNDING STATUS TERMINATION COST FUNDING (In Thousand $)

(1) (7 (3) (4) (5) (6) (7) (8) (9)

Authorized Funding Plan Funding Floor Curve Actual Funding Month YFM End Est Cost Funded C nte erct IAmou Eund Est, Cost o Funded (2) X (3) (3) X (4) (1) X (4) (7)/(8)

DEC 1991 3,055 15,542 20%lo 80W/ 16% 2,444 3,220 15,542 21%

DEC 1992 4,104 25,418 16% 8Wo 13% 3,283 4,118 25,418 16%

DEC 1993 5,237 26,689 20%/ 80/o 16%/. 4,190 5,222 26,689 20%

DEC 1994 6,449 28,023 23% 80/0 18%/ 5,159 5,942 28,023 21%

DEC 1995 6,931 26,658 26% 80%I 21% 5,545 8,602 26,658 32%M DEC 1996 8,397 27,991 30% 80W/. 24% 6,718 12,434 27,991 44%

DEC 1997 9,699 29,390 33% 80/ 26% 7,759 16,762 29,390 57/

DEC 1998 12,044 33,456 36% 800/ 29%/ 9,635 21,717 33,456 65%

DEC 1999 13,700 35,129 39o/. 800/. 31% 10,960 23,928 35,129 68%

DEC 2000 15,492 36,885 42e/ 800/. 34% 12,393 26,269 36,885 71%

DEC 2001 17,428 38,730 45% 800/. 36% 13,943 28,191 38,730 73%

DEC 2002 19,343 40,298 48% 800/. 381/% 15,474 30,108 40,298 75%

DEC 2003 .

21,580 42,313 51% 80/ 41% 17,264 30,939 42,313 73%

r DEC 2004 23,991 44,429 54% 800/o 430/0 19,193 31,680 44,429 710/61 DEC 2005 26,124 46,650 56% 8Wo 45%/. 20,899 DEC 2006 28,900 48,982 590/0 81% 481/. 23,409 DEC 2007 31,888 51,432 62%/ 82M/e 51% 26,148 DEC 2008 35,102 54,003 65% 83% 540/% 29,135 DEC 2009 37,991 56,703 670/ 84% 56% 31,913 DEC 2010 41,677 59,538 70e/. 85%/ 600/6 35,425 DEC 2011 45,636 62,515 73% 86% 63% 39,247 DEC 2012 49,887 65,641 76% 87% 66% 43,402 DEC 2013 53,760 68,923 78e/. 88%/ 690/. 47,309 DEC 2014 58,619 72,369 81% 890/% 72/. 52,171 DEC 2015 63,830 75,988 84% 90/ 76% 57,447 DEC 2016 68,617 79,787 86% 91% 786/6 62,442 DEC 2017 74,561 83,777 89%/0 92%/ 82%6 68,596 DEC 2018 80,928 87,965 92M 93% 86% 75,263 DEC 2019 87,746 92,364 95% 94% 890/0 82,481 DEC 2020 93,103 96,982 96%!. 950/0 91% 88,448 DEC 2021 101,831 101,831 100o% 96% 96%1 97,758 DEC 2022 106,923 106,923 100%/0 97r/ 97% 103,715 DEC 2023 112,269 112,269 100%/ 98e/ 98%/6 110,023 DEC 2024 117,882 117,882 100%/ 99O/. 99/. 116,703 DEC 2025 123,776 123,776 100%/ 1000/. 1000/ 123,776 DEC 2026 129,965 129,965 100"/. 100%/9 1000/. 129,965 Page 15

DWP PALO VERDE UNIT 3 FUNDING PLAN 100% I

[ _ _ _ __ FLOOFLOOR 18,AC8UAL]

60%

40%

2004 FUNDING STATUS

$AMOUNT PERCENT -

2%COMMITTED 22,985 51%/

ACTUAL 31,734 70%

FLOOR2 18,388 41%

109 199.1 .1994 .1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 Year Page 16

DEPARTMENT OF WATER & POWER 2001 PALO VERDE UNIT 3 FUNDING STATUS TERMINATION COST FUNDING (In Thousand $)

(1) (2) (3) (4) (5) (6) (7) (8) (9)

Audiorized Funding Plan Funding Floor Cuwre Actual Funding Month Yin End Et C Fded Crde m EFnd Est CosI % Funded (2) X (3) (3) X (4) (1) X (4) t7/(8)

DEC 1991 2,452 17,248 14% 80/ 11% 1,962 2540 17,248 15%

DEC 1992 3,452 27,160 13% 80/ 100/! 2,762 3,438 27,160 13%

DEC 1993 4,636 28,518 16% 80°/ 13% 3,709 4,542 28,518 16%!.

DEC 1994 5,905 29,944 20% 80°/ 16% 4,724 5,356 29,944 180!/

DEC 1995 6,923 30,100 23% 80%/ 18%/ 5,538 8,181 30,100 27/.

DEC 1996 8,217 31,605 26% 80°/ 21% 6,574 12,332 31,605 390/0 DEC 1997 9,956 33,185 300/, 80°/. 24% 7,964 16,843 33,185 5t%

DEC 1998 11,871 35,973 33% 80W/. 26% 9,497 21,831 35,973 61%

DEC 1999 13,598 37,772 36% 80°/ 29'/! 10,878 23,832 37,772 63%

DEC 2000 15,467 39,660 390/0 80°/! 31% 12,374 26,233 39,660 66%

DEC 2001 17,490 41,643 426/! 80/ 34%! 13,992 28,421 41,643 68°/!

DEC 2002 18,396 40,879 45% 80°/ 36% 14,716 29,941 40,879 730/

DEC 2003 20,603 42,923 48% 80/ 38%!. 16,482 30,701 42,923 72°!/

DEC 2004 22,985 45,069 51% 80°/ 41% 18,388 31,734 45,069 70%I DEC 2005 25,554 47,323 54% 80%/. 43%!, 20,443 DEC 2006 27,826 49,689 56% 80W/o 45%/, 22,261 DEC 2007 30,782 52,173 590/a 80/ 47% 24,626 DEC 2008 33,965 54,782 62% 81% 50% 27,511 DEC 2009 37,389 57,521 65% 82°! 53% 30,659 DEC 2010 40,466 60,397 670!. 83% 56% 33,587 DEC 2011 44,392 63,417 70% 84% 59°! 37,289 DEC 2012 48,609 66,588 73% 85% 62'!. 41,318 DEC 2013 53,137 69,917 76% 86% 65% 45,698 DEC 2014 57,262 73,413 780/0 87% 68°/! 49,818 DEC 2015 62,438 77,083 81% 88% 71% 54,945 DEC 2016 67,988 80,938 84% 89°/ 75%!, 60,509 DEC 2017 73,087 84,985 86% 90%/0 77!/ 65,778 DEC 2018 79,418 89,234 890/s 91% 81% 72,270 DEC 2019 86,200 93,695 92%! 92°/! 85% 79,304 DEC 2020 93,461 98,380 95% 93% 88°/! 86,919 DEC 2021 101,233 103,29 980/0 94% 92°/! 95,159 DEC 2022 108,464 108,464 10/0 95./! 95% 103,041 DEC 2023 113,887 113,887 100%/0 96% 96% 109,332 DEC 2024 119,582 119,582 10/0 97% 971/6 115,994 DEC 2025 125,561 125,561 100%/ 980/. 980!. 123,050 DEC 2026 131,839 131,839 100"/! 990/, 99! 130,520 DEC 2027 138,431 138,431 100°/ 100°/! 100'!. 138,431 Page 17

DWP PALO VERDE ALL UNITS FUNDING PLAN

.100%

9L0 X2004mmilTD FLOOR -*- A _ ra_

860%III I -

70% -. O-jK 60%

40%,

30% $AMOUNT PERCENT 20% COMMITTED 69,326 53%

ACTUAL 95,181 73%

10% FLOOR 55,461 43%

0% _ _ _ _ _ _ _ _ _ _ _ _ _ .

1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 Year Page 18

DEPARTMENT OF WATER & POWER 2001 PALO VERDE ALL UNITS FUNDING STATUS TERMINATION COST FUNDING (In Thousand $)

(1) (2) (3) (4) (5) (6) (7) (0 t Authorized Funding Plan Funding Floor Curve Actual Funding Month YAK Fund EstCost %Funded Ce t SAmount Fund Esr Cost % Funded (2)X (3) (3) X (4) (1) X (4) (7)/(8)

DEC 1991 8,768 48,467 180/ 80/ 14% 7,014 9,186 48,467 190/,

DEC 1992 11,886 78,410 15% 80/ 12/% 9,509 11,862 78,410 15%

DEC 1993 15,386 82,331 190/e 80%/ 15% 12,309 15,126 82,331 DEC 1994 19,134 86,447 22% 80%/ 18%/ 15,307 17,504 86,447 20%

DEC 1995 20,788 82,440 25% 80%/ 20% 16,631 25,844 82,440 31%

DEC 1996 24,974 86,562 29'!.

80%/

23% 19,979 37,694 86,562 44%

DEC 1997 29,281 90,890 32°/ 26% 23,425 50,533 90,890 56%

80%/

DEC 1998 35,675 101,211 35% 28% 28,540 65,398 101,211 65%

80%/

DEC 1999 40,646 106,272 38% oe/ 31% 32,517 71,236 106,272 67%

DEC 2000 46,026 111,585 41% 800/. 33% 36,821 78,596 111,585 70e/.

DEC 2001 51,843 117,164 44% 80%/ 35% 41,474 84,627 117,164 72'!.

DEC 2002 55,799 118,035 47% 80/ 38% 44,639 89,971 118,035 76%

820/9 DEC 2003 62,307 123,937 50% 80% 40'! 49,846 92,401 123,937 75%

810/,

DEC 2004 69,326 130,134 53% 80% 43% 55,461 95,181 130,134 73%!.

DEC 2005 76,425 136,640 56% 80% 45% 61,140 DEC 2006 84,054 143,472 590/0 470 68,084 DEC 2007 92,776 150,646 62V/. 51% 76,076 DEC 2008 102,160 158,178 65% 54% 84,793 DEC 2009 111,165 166,087 67% 56% 93,379 DEC 2010 121,351 174,391 700/a 85% 59°/. 103,149 DEC 2011 132,912 183,111 730/% 86% 62/! 114,304 DEC 2012 145,326 192,267 76% 87% 66% 126,433 DEC 2013 157,959 201,880 78%!, 88% 690/. 139,004 DEC 2014 170,820 211,974 81% 89% 72°/! 152,030 DEC 2015 186,039 222,573 84% 90% 75% 167,435 DEC 2016 201,554 233,701 86% 91% 78% 183,414 DEC 2017 218,143 245,386 890/. 92%/. 82% 200,692 DEC 2018 235,975 257,656 92e 93% 85% 219,457 DEC 2019 255,890 270,538 95% 94%/s 89% 240,537 DEC 2020 275,267 284,065 95.,. 92%/ 261,504 DEC 2021 296,203 298,269 99%/ 96% 95% 284,354 DEC 2022 313,182 313,182 10/0 97%/ 97/ 303,787 DEC 2023 328,841 328,841 100%/0 980/. 98% 322,264 DEC 2024 345,283 345,283 100%/ 99%/0 99%/. 341,830 DEC 2025 362,547 362,547 100%/ 100'!. 100%/. 362,547 DEC 2026 261,804 261,804 100°/ 100%/ 1000/. 261,804 DEC 2027 138,431 138,431 100%/ 1000/% 100I* 138,431 Page 19

Palo Verde Nuclear Generating Station Appendix C, Tab I APS 2004 Annual Funding Status Report APS reports that its Master Trust Agreement was amended December 19, 2003.

A copy of the amendment is enclosed.

AMENDMENT NO. 4 Decommissioning Trust Agreement (PVNGS Unit 1)

This Amendment No. 4 dated as of Ih (jtgA, 2003, to the Decommissioning Trust Agreement (PVNGS Unit 1), dated as of July 1, 1991, as amended by Amendment No. 1 thereto dated as of December 1, 1994, Amendment No. 2 thereto dated as of December 16, 1996, and Amendment No. 3 thereto dated as of March 18, 2002 (the "Decommissioning Trust Agreement", terms used herein as therein defined), is entered into between Arizona Public Service Company ("APS") and Mellon Bank, N.A., as Decommissioning Trustee

("Decommissioning Trustee").

RECITALS:

WHEREAS, the parties hereto wish to amend the Decommissioning Trust Agreement.

NOW, THEREFORE, in consideration of the premises and of other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. Amendment..

(a) A new Section 29 will be added at the end of the Decommissioning Tnist Agreement and will read in full as follows:

Section 29. Notice Regarding Disbursements or Payments.

Notwithstanding anything to the contrary in this Agreement, except for (i) payments of ordinary administrative costs (including taxes) and other incidental expenses of the Funds (including legal, accounting, actuarial, and trustee expenses) in connection with the operation of the Funds, (ii) withdrawals being made under 10 CFR 50.82(a)(8), and (iii) transfers between the Funds in accordance with the provisions of this Agreement, no disbursement or payment may be made from the Funds until written notice of the intention to make a disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, at least 30 working days before the date of the intended disbursement or payment.

The disbursement or payment from the Funds, if it is otherwise in compliance with the terms and conditions of this Agreement, may be made following the 30-working day notice period if no written notice of objection from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, is received by the Decommissioning Trustee or APS within the notice period. The required notice may be made by the Decommissioning Trustee or on the Decommissioning Trustee's behalf. No such notice is required for withdrawals being made pursuant to 10 CFR 50.82(a)(8)(ii),

including withdrawals made during the operating life of Unit I to be used 00G95.217?4\1k'Cgan1C\PHX\I 403632.2

for decommissioning planning. In addition, no such notice is required to be made to the NRC after decommissioning has begun and withdrawals are being made under 10 CFR 50.82(a)(8). This Section 29 is intended to qualify each and every provision of this Agreement allowing distributions from the Funds, including but not limited to Section 10 hereof, and in the event of any conflict between any such provision and this Section 29, the provisions of this Section 29 shall control.

SECTION 2. Miscellaneous (a) Full Force and Effect.

Except as expressly provided herein, the Decommissioning Trust Agreement shall remain unchanged and in full force and effect. Each reference in the Decommissioning Trust Agreement and in any exhibit or schedule thereto to "this Agreement," "hereto," "hereof' and terms of similar import shall be deemed to refer to the Decommissioning Trust Agreement as amended hereby.

(b) Counterparts/Representations.

The Amendment No. 4 may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment No. 4 by signing any such counterpart. Each party represents and warrants to the other that it has full authority to enter into this Amendment upon the terms and conditions hereof and that the individual executing this Amendment on its behalf has the requisite authority to bind that Party.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to the Decommissioning Tr-st Agreement to be duly executed as of the day and year first above written.

ARIZONA PUBLIC SERVICE COMPANY

Title:

MELLON BANK, N.A. as Decommissioning Trustee By:_ _ _ _ _ __

Title:

UIC.T PWSIDNr 00095.2 i74\Ike, aijc\.PHX\I403632. 2

STATE OF ARIZONA )

) ss:

County of Maricopa )

The foregoing instrument was acknowledged before me this IZGoL day of

. 2003, by av'}if 1 3 'o,11'theVro xr of ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation, on beha said corporation.

Notary Public DE MARICpCUT My commission expires: Mycom COMMONWEALTH OF PENNSYLVANIA )

) ss:

County of Allegheny )

The foregoing in ment was acknowledged b5ore me this _ _ day of 2003, by rb-i @ a )k~j d Mellon Bank, N.A. a national banking association having trust powers, as Decommissioning Trustee, on behalf of said national banking association.

• - WPublic My commission expires: COMMONWEALTH OF PENNSYLVANIA

_\3. COG ( 7 uie Notarial Seal c:) C~~ityfPtsburgh, Allegheny County MY Expires Oct 13, 2007 Member Pennsylvania Assciafinn Of Notaries 00095j.21I74\Ike vamckP FLX\ 1403632.23 3

AMENDMENT NO. 7 Decommissioning Trust Agreement (PVNGS Unit 2)

This Amendment No. 7 dated as of Law"rl, 2003, to the Amended and Restated Decommissioning Trust Agreement (PVNGS Unit 2), dated as of January 31, 1992, as amended by Amendment No. I thereto dated as of November 1, 1992, Amendment No. 2 thereto dated as of November 1, 1994, Amendment No. 3 thereto dated as of June 20, 1996, Amendment No. 4 thereto dated as of December 16, 1996, Amendment No. 5 thereto dated as of June 30, 2000 and Amendment No. 6 thereto dated as of March 18, 2002 (the "Decommissioning Trust Agreement", terms used herein as therein defined), is entered into between Arizona Public Service Company ("APS"), U.S. Bank National Association, as successor-to State Street Bank and Trust Company, as successor to The First National Bank of Boston, as Owner Trustee and as Lessor, and Mellon Bank, N.A., as Decommissioning Trustee ("Decommissioning Trustee").

RECITALS:

WHEREAS, the parties hereto wish to amend the Decommissioning Trust Agreement.

NOW, THEREFORE, in consideration of the premises and of other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. Amendment.

(a) A new Section 34 will be added at the end of the Decommissioning Trust Agreement and will read in full as follows:

Section 34. Notice Regarding Disbursements or Payments.

Notwithstanding anything to the contrary in this Agreement, except for (i) payments of ordinary administrative costs (including taxes) and other incidental expenses of the Funds (including legal, accounting, actuarial, and trustee expenses) in connection with the operation of the Funds, (ii) withdrawals being made under 10 CFR 50.82(a)(8), and (iii) transfers between the Funds in accordance with the provisions of this Agreement, no disbursement or payment may be made from the Funds until written notice of the intention to make a disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear. Material Safety and Safeguards, as applicable, at least 30 working days before the date of the intended disbursement or payment.

The disbursement or payment from the Funds, if it is otherwise in.

compliaiice with the terms and conditions of this Agreement, may be made.

following the 30-working day notice period if no written notice of objection from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, is received by the Decommissioning Trustee or APS within the notice period. The required notice may be made by the Decommissioning 00093. 2 74\1 kegmanP HXBE 139909 5.3

Trustee or on the Decommissioning Trustee's behalf. No such notice is required for withdrawals being made pursuant to 10 CFR 50.82(a)(8)(ii),

including withdrawals made during the operating life of Unit 2 to be used for decommissioning planning. In addition, no Such notice is required to be made to the NRC after decommissioning has begun and withdrawals are being made under 10 CFR 50.82(a)(8). This Section 34 is intended to qualify each and every provision of this Agreement allowing distributions from the Funds, including but not limited to Section 11 and Section 12 hereof, and in the event of any conflict between any such provision and this Section 34, the provisions of this Section 34 shall control.

(b) Paragraph (1) of Exhibit B to the Decommissioning Trust Agreement is hereby deleted and is replaced in its entirety by the following:

(l) (x) corporate equity securities, including, but not limited to, investment of units of common or collective trust funds investing in corporate equity securities; including, but not limited to, the Decommissioning Trustee's Nuclear Decommissioning Trust Equity Index Fund (the "NDT Equity Index Fund") and (y) obligations not included in clauses (a) through (k) issued or guaranteed by a person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America, including Federal Intermediate Credit Bank, Banks for Cooperatives, Federal Land Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, provided, that no more than fifty percent (50%) of. the aggregate assets of the Funds may be invested in securities described in (x) and (y) of this subparagraph (I) during the period from June 27, 1996 through December 31, 2003, no more than forty percent. (40%) during the period from January 1, 2004 through December 31, 2006, and no more than twenty percent (20%) during the period from January 1, 2007 through January 31, 2010; and provided further that after January 31, 2010, no investmentsishall be made in such securities.

SECTION 2. Miscellaneous I

(a) Full Force and Effect.

Except as expressly provided herein, the Decommissioning Trust Agreement shall remain unchanged and in full force and effect. Each reference in the Decommissioning Trust Agreement and in any exhibit or schedule thereto to "this Agreement," "hereto," "hereof' and terms of similar import shall be deemed to refer to the Decommissioning Trust Agreement as amended hereby.

00D95.+/-2 ?4\1ke-.mc\PR-X\1 3~999. 3

(b) Counterparts/Representations.

The Amendment No. 7 may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment No. 7 by signing any such counterpart. Each party represents and warrants to the other that it has full authority to enter into this Amendment upon the terms and conditions hereof and that the individual executing this Amendment on its behalf has the requisite authority to bind that Party.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 7 to the Decommissioning Trust Agreement to be duly executed as of the day and year first above written.

ARIZONA PUBLIC SERVICE COMPANY B y: :N

Title:

fieaula z-MELLON BANK, N.A. as Decommissioning Trustee

Title:

NJi ch (eSID 1e-1 U.S. BANK NATIONAL ASSOCIATION, as Owner Trustee under a Trust Agreement with Security Pacific Capital. Leasing Corporation and as Lessor under a Facility Lease with Arizona Public Service Company By:

Title:

-i-r.4- oA c4-00095 .74%1kevu:\PHXI 39-')095.3 3

U.S. BANK NATIONAL ASSOCIATION, as Owner Trustee under a Trust Agreement with Emerson Finance LLC and as Lessor under a Facility Lease with Arizona Public Service Company By: -

Title:

-nnu.&A- 0-f-P'N k

0009, .21 74\Ike imcPHXNI 399093.3

• 4

STATE OF ARIZONA

) ss:

County of Maricopa The foregoing instrument was acknowledged before me this l With day of Jl~pg-ibpr , 2003, by rarcj~(;)6T2X the Tr aWurer of ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation, on behalf of said corporation.

.~C$ 6LX Notary Public DEBRA L. BLONOIN NOTARY PU LIC.ArIzone My commission expires: MARICOPA COUNTY Lr my Exie une7 2DOI COMMONWEALTH OF PENNSYLVANIA

) ss:

. County of Allegheny The foregoing instrument was acknowledged before me this \k'k day of

_ _ _ 2003, by CHAOS c OQL, a \w'Xasicen of Mellon Bank, N.A. a national banking association having trust powers, as Decommissioning Trustee, on behalf of said national banking association.

k-Aj--Qo otary Public*

M-y comrnlission expires: COMMONWEALTH OF PENNSYLVANIA Notaial Seal Jide An Mosco. Notzy Public 02-2crJ7b City Of PftsbWuh, Alegheny CoQutY My Comnmssion Expires Od 13,2007 Memnber, Pennsylvania Assoclation Of Notaries 9

00091i2 174kej~amcPHX%I 55909.

[COMMONWEALTH OF MASSACHUSETTS] )

) ss:

County of S ag 4 l0t )

The foregoing instrument was acknowledged before me this f'149 day of Pecebe- , 2003, by ?ek-_.Wi VA. y , a Sir;< °'Caf of U.S. Bank National Association, in its capacity as Owner Trustee under a Trust Agreement with Security Pacific Capital Leasing Corporation and as Lessor under a Facility Lease with Arizona Public Service Company, on behalf of said association in such capacities.

Notary Public My commission expires: t MARIA I. ARGUELLO NOTARY PUBLIC MY COMMISSION EXPIRES

&r-e SEPTEMBER 9, 2005

[COMMONWEALTH OF MASSACHUSETTS] )

) ss:

County of StATg- if )

The foregoing instrument was acknowledged before me this I1'y day of

_____,_b__ 2003, by lesf b rAay a < OWc,a of U.S. Bank National Association, in its capacity as Owner Trustee under a Trust Agreement with Emerson Finance LLC and as Lessor under a Facility Lease with Arizona Public Service Company, on behalf of said association in such capacities.

Notary Public

• Mycommission expires:

eMARIA I. ARGUELLO NOTARY PUBLIC MY COMMISSION EXPIRES SEPTEMBER 9, 2005 S.3 00095.21 7411Ler'a4%1CkPWV'1 1131"109 6

AMENDMENT NO. 4 Decommissioning Trust Agreement (PVNGS Unit 3)

This Amendment No. 4 dated as of _________ 2003, to the Decommissioning Trust Agreement (PVNGS Unit 3), dated as of July 1, 1991, as amended by Amendment No. I thereto dated as of December 1, 1994, Amendment No. 2 thereto dated as of December 16, 1996, and Amendment No. 3 thereto dated as of March 18, 2002 (the "Decommissioning Trust Agreement", terms used herein as therein defined), is entered into between Arizona Public Service Company ("APS") and Mellon Bank, N.A., as Decommissioning Trustee

("Decommissioning Trustee").

REC I TA LS:

WHEREAS, the parties hereto wish to amend the DecommissioningTrust Agreement.

NOW, THEREFORE, in consideration of the premises and of other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. Amendment.

(a) A new Section 29 will be added at the end of the Decommissioning Trust Agreement and will read in full as follows:

Section 29. Notice Regarding Disbursements or Payments.

Notwithstanding anything to the contrary in this Agreement, except for (i) payments of ordinary administrative costs - (including taxes) and other incidental expenses of the Funds (including legal, accounting, actuarial, and trustee expenses) in connection with the operation of the Funds, (ii) withdrawals being made under 10 CFR 50.82(a)(8), and (iii) transfers between the Funds in accordance with the provisions of this Agreement, no disbursement or payment may be made from the Funds until written notice of the intention to make a disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, at least 30 working days before the date of the intended disbursement or payment.

The disbursement or payment from the Funds, if it is otherwise in compliance with the terms and conditions of this Agreement, may be made following the 30-working day notice period if no written notice of objection from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, is received by the Decommissioning Trustee or APS within the notice period. The required notice may be made by the Decommissioning Trustee or on the Decommissioning Trustee's behalf. No such notice is required for withdrawals being made pursuant to 10 CFR 50.82(a)(8)(ii),

including withdrawals made during the operating life of Unit 3 to be used 00095.? 174\1kegamc\PHX\140364 1.2

for decommissioning planning. In addition, no such notice is required to be made to the NRC after decommissioning has begun and withdrawals are being made under 10 CFR 50.82(a)(8). This Section 29 is intended to qualify each and every provision of this Agreement allowing distributions from the Funds, including but not limited to Section 10 hereof, and in the event of any conflict between any such provision and this Section 29, the provisions of this Section 29 shall control.

SECTION 2. Miscellaneous (a) Full Force and Effect.

Except as expressly provided herein, the Decommissioning Trust Agreement shall remain unchanged and in full force and effect. Each reference in the Decommissioning Trust Agreement and in any exhibit or schedule thereto to "this Agreement," "hereto," "hereof' and terms of similar import shall be deemed to refer to the Decommissioning Trust Agreement as amended hereby.

(b) Counterparts/Representations.

- The Amendment No. 4 may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment No. 4 by signing any such counterpart. Each party represents and warrants to the other that it has full authority to enter into this Amendment upon the terms and conditions hereof and that the individual executing this Amendment on its behalf has the requisite authority to bind that Party.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to the Decommissioning Trust Agreement to be duly executed as of the day and year first above written.

ARIZONA PUBLIC SERVICE COMPANY By_______

Title:

res ae MELLON BANK, N.A. as Decommissioning Trustee By:_____________ _

Title:

'Jic~s efE -s uo r 00095.2174%1kesanic\PWX I 403641.2 2

STATE OF ARIZONA

) ss:

County of Maricopa The foregoing instrument was acknowledged before me this l day of pCQiYl be, , 2003, by ray-16M2 the Ie, rof ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation, on beha f said corporation.

P) " A i)n L My commission expires:

COMMONWEALTH OF PENNSYLVANIA

) ss:

County of Allegheny The foregoing inru ment was acknowledged before me this I9 day of A, 2003, by j a 0% qVq Tof Mellon Bank, N.A. a ational bankcing association having trust powers, as Decommissioning Trustee, on behalf of said national banking association.

-V'- 4w(o Public My commission expires: COMMONWEALTH OF PENNSYLVANIA Nodaril Sea

' C-) ic \-. 70ce) Julie Ann Mosco. Notary Public City Of Pittsburgh, Alegheny County t 4v (w tnlIor Fypires Oct. 13.2007

-*  ;'-. A ' mturies D009i.21 74\1kegantIc\PHX\4O364l .2 3

Palo Verde Nuclear Generating Station Appendix C, Tab 2 SRP 2004 Annual Funding Status Report SRP reports that its Master Trust Agreement was amended November 19, 2003.

A copy of the amendment is enclosed.

AMENDMENT NO. 1 TO THE SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT DECOMMISSIONING TRUST FUND AGREEMENT This Amendment is effective as of this K day of Ikt)?;4lw 2003 by and between SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, an agricultural improvement district organized under the laws of the State of Arizona ("Grantor"), and MARSHALL & ILSLEY TRUST COMPANY N.A., a national association having trust powers, as successor in interest to M & I MARSHALL & ILSLEY TRUST COMPANY OF ARIZONA, a banking corporation having trust powers and organized under the laws of the State of Arizona ("Trustee").

RECITALS This Amendment Number 1 to the Salt River Project Agricultural Improvement and Power District Decommissioning Trust Fund Agreement is made with reference to the following fact among others:

To meet new requirements established by the Nuclear Regulatory Commission under 10 CFR § 50.75, the Grantor and Trustee have reached an understanding resulting in the following modification and addition to the Salt River Project Agricultural Improvement and Power District Decommissioning Trust Fund Agreement dated July 6, 1990 (the "Agreement').

NOW, THEREFORE, in consideration of the mutual covenants, terms, and conditions set forth herein, the Grantor and Trustee agree that the Agreement be and is hereby amended as follows:

1. NEW SECTION 2.03 Section 2.03 is deleted in its entirety and a new section 2.03 is hereby substituted therefore; new Section 2.03 reads as follows:

2.03 Adiustments for Excess Contributions. The Trustee and the Grantor understand and agree that the value of the assets in the Trust Fund, including earnings thereon, from time to time may exceed the greater of the minimum amount than required to be maintained under the Regulations or under the ANPPPA (such excess is hereinafter referred to as for the purposes of this Agreement as the "Excess Contribution"). Subject to the provisions of Section 2.08 below, upon Certification of the amount of any Excess Contribution, the Trustee shall pay the amount requested in the Certificate to the person or persons specified (which may be the Grantor). In no event shall the amount so paid exceed the amount of the Excess Contribution specified by the Certificate.

2. NEW SECTION 2.08

A new Section 2.08 is hereby added, which Section reads as follows:

2.08 Notice Regarding Disbursements or Payments. Except for (i) payments of ordinary administrative costs (including taxes) and other incidental expenses of the fund (including legal, accounting, actuarial, and trustee expenses) in connection with the operation of the fund, and (ii) withdrawals being made under 10 CFR § 50.82(a)(8), no disbursement or payment may be made from the trust until written notice of the intention to make a disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, at least 30 working days before the date of the intended disbursement or payment. The disbursement or payment from the trust may be made following the 30-working day notice period if no written notice of objection from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, is received by the Trustee or the Company within the notice period. The required notice may be made by the Trustee or on the Trustee's behalf. No such notice is required for withdrawals being made pursuant to 10 CFR § 50.82(a)(8)(ii), including withdrawals made during the operating life of the plant to be used for decommissioning planning. In addition, no such notice is required to be made to the NRC after decommissioning has begun and withdrawals are being made under 10 CFR § 50.82(a)(8).

3. NO OTHER MODIFICATION:

A) Except as specifically set forth otherwise in this Amendment, the terms and conditions of the Agreement shall apply to this Amendment. In case of a conflict in the provisions, the terms of this Amendment shall control.

B) In all other respects the Agreement shall remain unchanged and in full force and effect.

IN WITNESS WHEREOF, the Grantor and Trustee have executed this Amendment as of the dates set forth below, with the understanding that the Amendment is effective as of the day and year first written above.

GRANTOR: TRUSTEE:

SALT RIVER PROJECT AGRICULTURAL MARSHALL & ILSLEY IMPROVEMENT AND POWER DISTRICT TRUST COMPANY N.A.

By:_ _

William P. Schrader

__ By 4m/6Ž~*i Its: President Its:_ _ _ _ _ _ _P__

Date:__ _ _ _ _ Date: _____3__31 I__ _3_

APPROVED AS TO FORM Saltes Department:

By: .2

Palo Verde Nuclear Generating Station Appendix C, Tab 3 EPE 2004 Annual Funding Status Report EPE reports that its Master Trust Agreement was amended December 18, 2003.

A copy of the amendment is enclosed.

DECOMMISSIONING TRUST AGREEMENT Dated as of December 18, 2003 between EL PASO ELECTRIC COMPANY and BANK OF AMERICA, N.A.

As Decommissioning Trustee for Palo Verde Unit 1

DECOMMISSIONING TRUST AGREEMENT FOR PALO VERDE NUCLEAR GENERATING STATION UNIT I This Decommissioning Trust Agreement (the "Agreement"), to be effective as of December 24, 2003 (the "Effective Date"), between Bank of America, N.A., a national banking associatkio ('CDecommissioin-ing Trustee") and El Paso Electric Company, a Texas corporation

("El Paso").

The Nuclear Regulatory Commission ("NRC"), an agency of the United States of America, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974, has promulgated regulations codified in Title 10, Chapter 1 of the Code of Federal Regulations, Part 50, as amended. These regulations, applicable to El Paso, require that each holder of a license issued pursuant thereto must provide assurance that funds will be available for Decommissioning.

El Paso and others entered into the Arizona Nuclear Power Project Participation Agreement executed as of August 23, 1973 (the "ANPP Participation Agreement").

Amendment 13 to the ANPP Participation Agreement, effective June 15, 1991, requires El Paso to establish and maintain funds for the accumulation, over a period not in excess of the remaining term of the operating license for Unit 1 and the period thereafter until completion of Decommissioning, of funds sufficient to pay Decommissioning Cost.

In addition, El Paso is required by the Public Utility Commission of Texas ("PUCT"),

the New Mexico Public Regulation Commission ("NMPRC"), the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission to establish a source of funds to pay for Decommissioning.

Under Applicable Tax Law, certain federal income tax benefits are available to El Paso from establishing and making contributions to a "Nuclear Decommissioning Reserve Fund" for Unit 1. In order to satisfy its obligations under the ANPP Participation Agreement, to comply with the requirements of the governmental authorities referred to above, and to obtain such federal income tax benefits, on April 1, 1986, El Paso entered into a Decommissioning Trust Agreement, which was amended by Amendment No. I dated September 1, 1991 (the "Original Agreement"), creating two decommissioning trust funds to provide external funds for Decommissioning, for purposes of this Agreement designated as the Decommissioning Trust Fund and the Second Fund. The Decommissioning Trust Fund is intended at all times to qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law.

On January 9, 1996, in Cause No. 92-10148-FM, styled In re: El Paso Electric Company, the United States Bankruptcy Court for the Western District of Texas (Austin Division) entered an order confirming the Fourth Amended Plan of Reorganization of El Paso (the "Plan"). In accordance with the Plan, which became effective on February 12, 1996, El Paso and Decommissioning Trustee restated and amended the Original Agreement to ensure that the Decommissioning Trust Fund and the Second Fund would continue to be held, managed and distributed, without interruption, in accordance with the terms of the Original Agreement, Applicable Law, and Applicable Tax Law.

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This Agreement, in turn, amends and restates the Original Agreement, as restated and amended effective February 12, 1996, to read in its entirety as follows and continues the Decommissioning Trust Fund and the Second Fund.

Therefore, in consideration of the foregoing premises, the acceptance by Decommissioning Trustee of the trusts created, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto restate and amend the Original Agreement, as restated and amended effective February 12, 1996, as follows:

SECTION 1. Definitions; References to Sections. All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings set forth in Appendix A hereto. Unless otherwise stated, references to a "Section" are to a section of this Agreement.

SECTION 2. Creation of Trust Funds. El Paso has established and hereby confirms the establishment with Decommissioning Trustee of the Decommissioning Trust Fund and the Second Fund (each a "Fund" and together the "Funds"). Each Fund shall include: (A) all cash and investments thereof, as more specifically described in Section 7; (B) all dividends, interest, cash, instruments, and other property from time to time received, receivable, or otherwise distributed or distributable in respect of or in exchange for any or all such investments; (C) all rights and privileges with respect to such investments; and (D) all proceeds of any of the foregoing and any property of any character whatsoever into which any of the foregoing may be converted.

SECTION 3. Purpose of Trust Funds; Tax Qualification. The Funds are for the accumulation and funding of amounts to pay costs, liabilities, and expenses of Decommissioning, including the accumulation, over a period not in excess of the remaining term of the operating license for Unit 1 and the period thereafter until completion of Decommissioning, of amounts which are sufficient to pay Decommissioning Cost. The Decommissioning Trust Fund, but not the Second Fund, is intended at all times to qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law. El Paso and the applicable Fiduciary Investment Manager(s), if any, and Decommissioning Trustee (but with respect to Decommissioning Trustee only as to those assets of the Funds that are not under the direction of a Fiduciary Investment Manager) shall seek to obtain the best possible tax treatment of amounts collected for nuclear plant decommissioning; and in this regard, El Paso and the applicable Fiduciary Investment Manager(s), if any, and Decommissioning Trustee (but with respect to Decommissioning Trustee only as to those assets of the Funds that are not under the direction of a Fiduciary Investment Manager) shall take maximum advantage of tax deductions and. .- ed-4s whe-. 4 is consistent with sound busii tss piactices to do so. The assets of the

.. -- I Decommissioning Trust Fund must bc used as authorized by section 468A of the Code and shall be used exclusively:

(A) subject to the limitations and conditions of Section 9, to satisfy, in whole or in part, El Paso's obligation to pay for Decommissioning; (B) subject to the limitations and conditions of Section 8, to pay Expenses; and (C) to the extent not currently required for the uses described in (A) and (B) above, and subject to the limitations and conditions of Section 7, for investment in Qualified Investments.

3

The Funds shall be used exclusively for Decommissioning of Unit 1. This Agreement may not be amended so as to violate section 468A of the Code or the regulations there under.

SECTION 4. Declaration and Acceptance of Trust. Decommissioning Trustee accepts the trusts created hereby and declares that it will hold and administer all estate, right, title, and interest in and to each Fund upon the trusts set forth herein, but only on the terms of this Agreement, and agrees to receive and disburse all moneys and investments constituting any part of each Fund in accordance with this Agreement. No implied duties or obligations shall be read into this Agreement against Decommissioning Trustee. Decommissioning Trustee shall not commit any act, enter into any transaction, or permit any act or transaction to occur that is an "act of self dealing" between the Decommissioning Trust Fund and "a disqualified person" as those terms are defined by Applicable Tax Law, and, if such an act occurs, Decommissioning Trustee shall promptly take all necessary steps to correct it as soon as it has knowledge of the occurrence.

SECTION 5. Ownership of Funds. Not in limitation of its fiduciary duty hereunder, title to any and all property held in each Fund shall be held by Decommissioning Trustee in its name as trustee as owner of record. At all times, Decommissioning Trustee shall follow the directives of (A) the applicable Fiduciary Investment Manager, if any, with respect to exercising any and all corresponding voting, consensual, and other rights accruing to the owner of such property in connection with such property, and, except as provided in this subsection 5.(A), (B)

El Paso with respect to exercising any and all such voting, consensual, and other rights.

Decommissioning Trustee shall have the right, in its name, as trustee upon prior written notice to El Paso, to settle, compromise, prosecute, or defend any action, claim, or proceeding with respect to any and all property held in each Fund. Subject to the provisions of this Agreement, Decommissioning Trustee may sell, assign, endorse, pledge, transfer, and make any agreement respecting, or otherwise deal with, any and all property held in each Fund; provided, however, that except as required by Section 7, nothing herein contained shall be construed as requiring or obligating Decommissioning Trustee to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim or notice, or to take any action with respect to any of the property held in each Fund. It is not the duty of Decommissioning Trustee or a Fiduciary Investment Manager to ensure that the Funds are adequate to pay for Decommissioning.

SECTION 6. Payments into the Funds. From time to time, but not less than yearly, El Paso shall pay amounts into one or both of the Funds. El Paso may deposit all or any part of any payment entirely into the Decommissioning Trust Fund, entirely into the Second Fund, or partly into each in whatever proportion El Paso shall determine in its discretion; except thlif 'a deduction is allowed under Applicable Tax Law for payments into the Decommissioning Trust Fund, El Paso shall not make, and Decommissioning Trustee shall not accept, any payment into such Fund unless such payment (a) is in cash, to the extent Applicable Tax Law requires the payment to be in cash, and (b) complies with the amount limitation imposed by Applicable Tax Law and a deduction pursuant to Applicable Tax Law is allowed for the entire payment.

Decommissioning Trustee may accept from El Paso, as proof that these conditions are satisfied, a certificate executed by El Paso as to compliance with the amount limitation and deductibility of such payment, and, unless Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee may rely on such certificate without further inquiry or verification.

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SECTION 7. Investment of Funds.

(A) Decommissioning Trustee. Any amounts held by Decommissioning Trustee in each Fund shall be invested and reinvested by it from time to time, but only in Qualified Investments; provided, however, if El Paso has delivered to Decommissioning Trustee a copy of an order of a state or federal regulatory agency that El Paso certifies is binding on El Paso and limits the investments in which all or a part of either Fund may be invested, the investment of such Fund shall not violate such order. A Fiduciary Investment Manager appointed by El Paso may direct investments and reinvestments of the Funds by written direction which shall certify that the directed investment qualifies as an investment in Qualified Investments and is within the limitation set forth in the preceding sentence. Decommissioning Trustee may rely upon such direction and certification without further inquiry or verification unless Decommissioning Trustee has actual knowledge that the directed investment does not satisfy the conditions and limitations of this Section 7.

In performing its duties and exercising its powers as Decommissioning Trustee hereunder, and in performing any investment management functions hereunder, Decommissioning Trustee shall comply with the following:

(i) it shall add all income, including interest, earned on the corpus of each Fund to such corpus as a part thereof, and shall owe the same duties with regard to such income as it owes with regard to such corpus; (ii) it shall have the continuing duty to review the assets of each Fund to determine the appropriateness of the investments consistent with all terms, provisions and limitations of this Agreement, including without limitation to ensure compliance with the provisions of the investment guidelines of this Section 7, any order of a state or regulatory agency limiting investments that El Paso has delivered and certified to Decommissioning Trustee as provided above, and any other applicable governing regulations; (iii) it shall not lend all or any part of either Fund to itself or to any of its officers or directors or permit any act of "self-dealing" prohibited by Applicable Tax Law; (iv) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, itself or any of its officers or directors, except that, if El Paso directs it to do so in writing, it may invest or reinvest amounts in the Funds in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, and except that, if El Paso directs it to do so in writing, it may invest amounts in the Funds in mutual funds that contain securities issued by Decommissioning Trustee provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; (v) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, El Paso, its subsidiaries or affiliates or their successors or assigns, except that, if El Paso approves in writing, it may invest or reinvest amounts in the Funds in mutual funds that contain securities issued by El Paso provided such 5

securities constitute no more than five percent (5%/o) of the fair market value of the assets of such mutual funds at the time of the investment; and (vi) Notwithstanding anything to the contrary in this Agreement, if directed by El Paso, Decommissioning Trustee shall hold and maintain one or both of the Funds in a segregated account and invest and administer such Fund(s) separately from the assets of Decommissioning Trustee or other trusts.

(B) Fiduciary Investment Manager. Any amount of each Fund directed to be invested by a Fiduciary Investment Manager shall be invested and reinvested by Decommissioning Trustee as directed by such Fiduciary Investment Manager from time to time, but only in Qualified Investments; provided, however, if El Paso has delivered to a Fiduciary Investment Manager a copy of an order of a state or federal regulatory agency that El Paso certifies is binding on El Paso and limits the investments in which all or a part of a Fund may be invested, the investment of such Fund shall not violate such order. A Fiduciary Investment Manager appointed by El Paso may direct investments and reinvestments of the Funds by written direction which shall certify that the directed investment qualifies as an investment in Qualified Investments and is within the limitation set forth in the preceding sentence. Decommnissioning Trustee may rely upon such written direction and certification without further inquiry or verification unless Decommissioning Trustee has actual knowledge that the directed investment does not satisfy the conditions and limitations of this Section 7.

In performing its duties and exercising its powers as a Fiduciary Investment Manager hereunder, a Fiduciary Investment Manager shall comply with the following:

(i) it shall direct the addition of all income, including interest, earned on the corpus of each Fund subject to its direction to such corpus as a part thereof, and shall owe the same duties with regard to such income as it owes with regard to such corpus; (ii) it shall have a continuing duty to review the assets of each Fund subject to its direction to determine the appropriateness of the investments consistent with all terms, provisions and limitations of this Agreement, including without limitation to ensure compliance with the provisions of the investment guidelines of this Section 7, any order of a state or regulatory agency limiting investments that El Paso has delivered to such Fiduciary Investment Manager as hereinabove provided and any other applicable governing regulations; (iii) it shall not direct the lending of all or any part of either Fund to itself or to any of its officers or directors or permit any act of "self-dealing" prohibited by Applicable Tax Law; (iv) it shall not direct the investment or reinvestment of amounts in either Fund with, or in any instrument or security issued by, itself or any of its officers or directors; (v) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, Decommissioning Trustee or any of Decommissioning Trustee's officers or directors, except that, if El Paso directs it to do so in writing, it may invest or reinvest amounts in the Funds in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, and except that, if El Paso directs it to do 6

so in writing, it may invest amounts in the Funds in mutual funds that contain securities issued by Decommissioning Trustee provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; (vi) it shall not direct the investment or reinvestment of amounts in either Fund with, or in any instrument or security issued by El Paso, its subsidiaries or affiliates or associates or their successors or assigns of El Paso, except that, if El Paso approves in writing, it may direct the investment or reinvestment of amounts in the Funds in mutual funds that contain securities issued by El Paso provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; and (vii) it shall provide Decommissioning Trustee directives concerning voting, consensual, and other rights and powers accruing in connection with assets of the Funds subject to such Fiduciary Investment Manager's direction.

(C) General. It is the intent of El Paso that neither Decommissioning Trustee nor a Fiduciary Investment Manager shall have any powers that are greater than those provided to trustees under the Texas Trust Code or that are inconsistent with the limitations that are set out in this Section 7.

(D) Investments Standards. To the extent not inconsistent with the other provisions of this Section 7 and to the extent that Decommissioning Trustee does not currently require the assets of the Funds for the purpose of satisfying the liability of El Paso for Decommissioning and to pay Expenses:

(i) Decommissioning Trustee shall, in connection with investing and reinvesting assets of the Funds, exercise the same standard of care that a reasonable person would exercise in the same circumstances; provided, however, that this subsection 7.(D)(i) shall apply only as to those assets of the Funds that are not subject to the direction of a Fiduciary Investment Manager; and (ii) a Fiduciary Investment Manager appointed to direct the investment and reinvestment of all or any portion of the assets of the Funds shall, with respect to such assets subject to its direction, exercise the same degree of care that a reasonable person would exercise in the same circumstances.

For purposes of this subsection entitled "Investment Standards", a "reasonable person" means a prudent investor as described in Chapter 117, Uniform Prudent Investor Act, of the Texas Property Code.

(E) Qualified Investments. Qualified Investments include those investments meeting the investment standards, limitations, conditions, and requirements prescribed in the foregoing subsections of this Section 7 and the following criteria which may be amended by El Paso upon written notice to Decommissioning Trustee and each Fiduciary Investment Manager.

(i) Investment Portfolio Goals. The Funds shall be invested consistent with the goals set forth in this subsection 7.(E)(i).

7

(a) Assets of the Decommissioning Trust Fund shall be invested only as permitted for a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law.

(b) Assets of the Funds shall be invested with a goal of earning a reasonable return commensurate with the need to preserve the value of the assets of the Funds.

(c) In keeping with prudent investment practices, the portfolio of securities held in the Funds shall be diversified to the extent reasonably feasible given the size of the Funds.

(d) Asset allocation and the acceptable risk level of the assets of the Funds should take into account market conditions, the time horizon remaining before the commencement and completion of Decommissioning, and the funding status of the Funds. While maintaining an acceptable risk level consistent with the goal referenced in subsection 7.(E)(i)(b) of this Section 7, the investment emphasis when the remaining life of the liability, as defined in subsection 7.(E)(ii)(d)(4) of this subsection, exceeds five years should be to maximize net long-term earnings. The investment emphasis in the remaining investment period of the Funds should be on current income and the preservation of each Fund's assets.

(e) In selecting investments, the impact of the investment on the volatility and expected return of the assets of the Funds, net of fees, commissions, expenses, and taxes should be considered.

(ii) General Requirements. The restrictions contained in this subsection 7.(E)(ii)apply to the Decommissioning Trust Fund and Second Fund in the aggregate.

For purposes of this subsection 7.(E)(ii), a commingled funds is defined as a professionally managed investment fund of fixed-income or equity securities established by an investment company regulated by the Securities Exchange Commission or a bank regulated by the Office of the Comptroller of the Currency.

(a) Diversification. For the purpose of this subsection 7.(E)(ii)(a), a commingled or mutual fund is not considered a security, rather, the diversification standard applies to all securities, including the individual securities held in commingled or mutual funds. Once the portfolio of securities (including those held in commingled or mutual funds) held in the Funds contains securities with an aggregate value in excess of $20 million, it shall be diversified such that:

(1) no more than five percent (5%) of the securities held may be issued by one entity, with the exception of the federal government, its agencies and instrumentalities; and 8

(2) the portfolio shall contain at least 20 different issues of securities, and municipal securities and real estate investments shall be diversified as to geographic region.

(b) Derivatives. The use of derivative securities in the Funds is limited to those whose purpose is to enhance returns of the Funds without a corresponding increase in risk or to reduce risk of the assets of the Funds. Derivatives may not be used to increase the value of the assets of the Funds by any amount greater than the value of the underlying securities. Prohibited derivative securities include, but are not limited to, mortgage strips; inverse floating rate securities; leveraged investments or internally leveraged securities; residual and support tranches of collateralized mortgage obligations; tiered index bonds or other structured notes whose return characteristics are tied to non-market events; uncovered call/put options; large counter-party risk through over-the-counter options, forwards and swaps; and instruments with similar high-risk characteristics.

(c) Leverage. The use of leverage (borrowing) to purchase securities or the purchase of securities on margin for a Fund is prohibited.

(d) Investment limits in equity securities. The following investment limits shall apply to the percentage of the aggregate market value of all non-fixed income investments relative to the total portfolio market value:

(1) except as noted in subsection 7.(E)(2)(b), when the weighted average remaining life of the liability exceeds 5 years, the equity cap shall be sixty percent (60%);

(2) when the weighted average remaining life of the liability ranges between 5 years and 2.5 years, the equity cap shall be thirty percent (30%). Additionally, during all years in which expenditures for Decommissioning occur, the equity cap shall also be thirty percent (30%);

(3) when the weighted average remaining life of the liability is less than 2.5 years, the equity cap shall be zero percent (0%);

(4) for purposes of this subsection 7.(E)(ii)(4), the weighted average remaining life in any given year is defined as the weighted average of years between the given year and the years of each Decommissioning outlay, where the weights are based on each year's expected Decommissioning expenditures divided by the amount of the remaining liability in that year; and 9

(5) should the market value of non-fixed income investments, measured monthly, exceed the appropriate cap due to market fluctuations, the market value of the non-fixed income investments shall be reduced below the cap as soon as practicable. Such reductions may be accomplished by investing all future contributions to a Fund in debt securities as is necessary to reduce the market value of the non-fixed income investments below the cap, or if prudent, by the sale of equity securities.

(iii) Specific Investment Restrictions. The restrictions contained in this subsection 7.(E)(iii). apply to the Decommissioning Trust Fund and the Second Fund in the aggregate.

(a) Fixed-income investments. Assets of the Funds shall not be invested in corporate or municipal debt securities that have a bond rating below investment grade "BBB-" by Standard & Poor's Corporation or "Baa3" by Moody's Investor's Service) at the time that the securities are purchased. If the debt rating of a company or municipality issuing the particular debt security falls below investment grade at some time after the security was purchased, the appropriateness of continuing to hold such security shall be reexamined. The overall portfolio of debt instruments shall have a quality level, measured quarterly not below an "AA" grade by Standard & Poor's Corporation or "Aa2" by Moody's Investor's Service. In calculating the quality of the overall portfolio, debt securities issued by the federal government shall be considered as having an "AAA" rating.

(b) Equity Investments.

(1) At least seventy percent (70%) of the aggregate market value of the equity assets of the Funds, including the individual securities in commingled funds, shall have a quality ranking from a major rating service such as the earnings and dividend ranking for common stock by Standard and Poor's or the quality rating of Ford Investor Services. Further, the overall portfolio of ranked equities shall have a weighted average quality rating equivalent to the composite rating of the Standard and Poor's 500 Index assuming equal weighting of each ranked security in the Index. If the quality rating, measured quarterly, falls below the minimum quality standard, the quality level of the equity assets of the Funds shall be increased to the required level as soon as is practicable and prudent: and (2) assets of the Funds shall not be invested in equity securities if the issuer has a capitalization of less than $100 million.

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(c) Commingled funds. The following guidelines shall apply to the investments made through commingled funds. Examples of commingled funds appropriate for investment by nuclear decommissioning trust funds include United States equity-indexed funds, actively managed United States equity funds, balanced funds, bond funds, real estate investment trusts, and international funds.

(1) The commingled funds should be selected consistent with the investment goals specified in subsection 7.(E)(i) and the general requirements in subsection 7.(E)(ii);

(2) in evaluating the appropriateness of a particular commingled fund, the following duties shall be of a continuing nature:

(I) a duty to determine whether the fund manager's fee schedule for managing the fund is reasonable, when compared to fee schedules of other such managers; (II) a duty to investigate and determine whether the past performance of the investment manager in managing the commingled fund has been reasonable relative to prudent investment and utility decommissioning trust practices and standards; and (III) a duty to investigate the reasonableness of the net after-tax return and risk of the commingled fund relative to similar funds, and the appropriateness of the commingled fund within all of the assets of the Funds; (3) the payment of load fees shall be avoided; and (4) commingled funds focused on specific market sectors or concentrated in a few holdings shall be used only as necessary to balance the Funds' overall investment portfolio mix.

Notwithstanding any other provision of this Section 7, nothing in this Section 7 shall be construed to permit any investment otherwise prohibited by any other provision of this Agreement, Applicable Law, or Applicable Tax Law. This Agreement and the investments of the Funds shall be interpreted and construed in a manner consistent with the parties' intention that this Agreement and the Funds at all times comply with all requirements of the Nuclear Regulatory Commission and other applicable governmental regulations and rules, including without limitation the rules of the PUCT, the NMPRC, and the Federal Energy Regulatory Commission, including but not limited to the "Final Rule" regarding the formation, organization and purposes of nuclear plant decommissioning trust funds and for fund investments issued June 16, 1995, as may be amended from time to time.

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SECTION 8. Expenses; Indemnification. El Paso shall pay all Expenses and, subject to Section 9.(D), may direct Decommissioning Trustee, in writing, to pay specified Expenses of a Fund from such Fund. El Paso shall certify in writing to Decommissioning Trustee whether and the extent to which an item is an Expense of a specified Fund and whether Applicable Tax Law permits its payment out of the assets of the Fund; and Decommissioning Trustee may, unless it has actual knowledge to the contrary, rely upon such certification without further inquiry or verification.

Except to the extent Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee shall be fully protected in relying upon the existence of any fact or state of facts represented to it in writing by El Paso or a duly appointed Fiduciary Investment Manager.

Except with respect to liability or fiduciary responsibility for any error or loss that may result by reason of the exercise or non-exercise of the duties, obligations, and/or fiduciary responsibility which are allocated to Decommissioning Trustee herein which is determined to be the result of Decommissioning Trustee's own negligence or willful misconduct, El Paso shall indemnify Decommissioning Trustee, directly from El Paso's own assets (including the proceeds of any insurance policy the premiums of which are paid from El Paso's own assets), from and against any and all claims, demands, losses, damages, expenses (including, by way of illustration and not limitation, reasonable attorneys' fees and other legal and litigation costs), judgments, and liabilities arising from, out of, or in connection with the administration or investment of the Funds. Decommissioning Trustee shall not be liable for any action taken by Decommissioning Trustee or any failure to act by Decommissioning Trustee if the action taken or the failure to act was directed by El Paso or a Fiduciary Investment Manager, if Decommissioning Trustee reasonably relied on such direction. This Section 8 shall survive the termination of this Agreement.

SECTION 9. Payments and Distributions from the Funds.

(A) Subject to the other provisions of this Section 9, Decommissioning Trustee shall make payments out of the Funds upon presentation by El Paso of (A) a certificate signed by El Paso (i) instructing Decommissioning Trustee to disburse amounts in the Funds in a manner designated in such certificate for purposes of paying for Decommissioning and (ii) certifying that disbursements, if any, directed to be made from assets of the Decommissioning Trust Fund are for payment of only those costs, liabilities, and expenses of Decommissioning that qualify as "nuclear decommissioning costs" under Applicable Tax law, and (B) documentation reasonably acceptable to Decommissioning Trustee that such payment for Decommissioning is due and payable.

(B) Upon termination of the Decommissioning Trust Fund under Applicable Tax Law, El Paso may direct Decommissioning Trustee to transfer all property remaining in the Decommissioning Trust Fund to El Paso for disbursement or distribution as may then be provided by law. In addition, upon its receipt of a certificate signed by El Paso certifying that Decommissioning has been completed under Applicable Law and all costs of Decommissioning have been paid in full, all property then held in both Funds shall be paid by Decommissioning Trustee to El Paso for disbursement or distribution as may then be provided by law and the Funds shall terminate.

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(C) At any time and from time to time El Paso may direct Decommissioning Trustee in writing to, and upon receipt of such direction Decommissioning Trustee shall, subject to the applicable provisions of Section 9.(D), distribute to El Paso for disbursement or distribution as then may be provided or permitted by law or transfer from the Decommissioning Trust Fund to the Second Fund any:

(i) Deemed Distribution Amount that El Paso certifies in writing is deemed distributed under Applicable Tax Law; (ii) Excess Contribution that El Paso certifies in writing (a) has occurred under Applicable Tax Law, and (b) is being transferred within the time permitted for withdrawal or transfer of such Excess Contribution by Applicable Tax Law; and (iii) amount that El Paso certifies in writing may be transferred to the Second Fund in accordance with Applicable Law and Applicable Tax Law by reason of the disposition of all or a part of El Paso's interest in or license to possess Unit 1.

(D) Notwithstanding any other provision in this Agreement, except for (i) payments made under Section 8 for Expenses, (ii) to the extent allowed by Applicable Law, Deemed Distribution Amounts and Excess Contributions transferred to the Second Fund or distributed to El Paso under Section 9.(C), and (iii) withdrawals made pursuant to 10 C.F.R. 50.82(a)(8) no disbursement or payment from the Funds shall be made unless (a) thirty (30) business days prior written notice of the intention to make such disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, and the Director, Office of Nuclear Material Safety and Safeguards, and (b) Decommissioning Trustee has not received written notice of an objection during such thirty (30) day period from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards,. The notices required by this Section 9.(D) may be made by or on behalf of Decommissioning Trustee.

(E) Unless Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee shall be fully protected in relying upon any certificate described in Section 9 without further inquiry or verification.

SECTION 10. Further Assurances. El Paso agrees that it will, at its sole expense, do all such further acts and things and execute and deliver all such additional conveyances, assignments, agreements, and instruments, as may be necessary or desirable or as Decommissioning Trustee may at any time reasonably request in connection with the administration and enforcement of this Agreement, or relative to the Funds or any part thereof, or in order to assure and confirm unto Decommissioning Trustee its rights, powers, and remedies hereunder.

El Paso may provide general investment policies in writing to Decommissioning Trustee or a Fiduciary Investment Manager, but may not engage in the day-to-day management of the Funds or mandate, or itself make, individual investment decisions except to the extent that El Paso retains the right under this Agreement to approve investments in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, in mutual funds that contain securities issued by Decommissioning Trustee (subject to the limitations elsewhere herein set forth), or in mutual funds that contain securities issued by El Paso, its subsidiaries or affiliates or their successors or assigns (subject to the limitations elsewhere herein set forth).

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El Paso will regularly supply to Decommissioning Trustee and to each Fiduciary Investment Manager, and regularly update, essential information about Unit 1, including its description, useful life, the Decommissioning plan that El Paso intends to follow, El Paso's anticipated liquidity needs once Decommissioning begins, and any other information that Decommissioning Trustee and a Fiduciary Investment Manager need to construct and maintain, over time, a sound investment plan for the Funds.

SECTION 11. Irrevocability and Modification. This Agreement is irrevocable and may not be amended or modified except by a writing signed by the parties hereto and approved, to the extent required by Applicable Law, by applicable regulatory authority(s). The parties agree that they will execute any amendments requested by El Paso that are necessary to secure and maintain the qualification of the Decommissioning Trust Fund as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law and the deduction of contributions to such Fund as provided by such law, or to comply with Applicable Law.

Not in limitation of the foregoing, if and to the extent that, now or in the future, federal tax law may extend certain tax benefits to a trust fund or funds that are created and maintained by El Paso for creation of a reserve or funds for costs associated with Decommissioning (hereinafter in this Section 11 referred to as such "other trusts") which such other trusts would qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law, including without limitation, Internal Revenue Code section 468A, only if established and maintained pursuant to a single trust agreement for a particular nuclear power plant, the parties hereto, upon the creation of such other trusts may amend this Agreement by attaching hereto as an allonge the governing instruments by which such other trusts may be created. In such event, such other trusts shall be administered under the terms of this Agreement to the extent not inconsistent with the governing instruments by which such other trusts may be created and such other trusts shall thereafter be administered as separate funds under the terms of this Agreement.

SECTION 12. Obligation for Decommissioning. Nothing in this Agreement and no act or omission relating to the Funds shall be read, construed, understood, or interpreted to place any obligation whatsoever on Decommnissioning Trustee or a Fiduciary Investment Manager relating to Decommissioning or any Decommissioning Cost, all of which shall at all times remain the sole obligation of El Paso.

SECTION 13. Governing Law. This Agreement shall be deemed to be a contract made in Texas for all purposes and shall be construed in accordance with and governed by the laws of such State, including the provisions of the Texas Trust Code, with respect to all matters of construction, validity, and performance.

SECTION 14. Resignation and Replacement of Decommissioning Trustee or Fiduciary Investment Manager.

(A) Decommissioning Trustee may resign at any time without cause by giving at least 30 days prior written notice to El Paso, and El Paso may remove Decommissioning Trustee at any time with or without cause by giving written notice to Decommissioning Trustee, such resignation or removal to be effective on the acceptance of appointment by a successor Decommissioning Trustee under this Section 14. In case of the resignation or removal of Decommissioning Trustee, El Paso may appoint a successor Decommissioning Trustee by an 14

instrument signed by El Paso. If a successor Decommissioning Trustee shall not have been appointed by El Paso within 30 days after the giving of such written notice of resignation or removal, Decommissioning Trustee or El Paso may apply to any court of competent jurisdiction to appoint a successor Decommissioning Trustee to act until such time, if any, as a successor Decommissioning Trustee shall have been appointed by El Paso and shall have accepted its appointment under this Section 14. Any successor Decommissioning Trustee so appointed by such court shall immediately and without further act be superseded by any successor Decommissioning Trustee appointed by El Paso as provided above.

(i) In appointing a Decommissioning Trustee, El Paso shall have the following duties which will be of a continuing nature:

(a) a duty to determine whether Decommissioning Trustee's fee schedule for administering the trust is reasonable when compared to other institutional trustees rendering similar services; (b) a duty to investigate and determine whether the past administration of trusts by Decommissioning Trustee has been reasonable; (c) a duty to investigate and determine whether the financial stability and strength of Decommissioning Trustee is adequate; (d) a duty to investigate and determine whether Decommissioning Trustee is in compliance with the requirements of this Agreement; and (e) a duty to investigate any other factors which may bear on whether Decommissioning Trustee is suitable.

(ii) Any successor Decommissioning Trustee, however appointed, shall execute and deliver to the predecessor Decommissioning Trustee an instrument accepting such appointment, and thereupon such successor Decommissioning Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties, and trusts of the predecessor Decommissioning Trustee with like effect as if originally named as Decommissioning Trustee herein; and such predecessor Decommissioning Trustee shall duly assign, transfer, deliver, and pay over to such successor Decommissioning Trustee all moneys or other property then held by such predecessor Decommissioning Trustee upon the trusts expressed in this Agreement, shall do all acts necessary to vest title of record in such successor Decommissioning Trustee, and shall transfer and deliver to such successor Decommissioning Trustee copies of all records pertaining to the Funds and this Agreement. In addition, upon the written request of such successor Decommissioning Trustee, such predecessor Decommissioning Trustee shall execute and deliver to such successor Decommissioning Trustee an instrument transferring to such successor Decommissioning Trustee, upon the trusts expressed in this Agreement, all the estates, properties, rights, power, duties, and trusts of such predecessor Decommissioning Trustee.

(iii) Any successor Decommissioning Trustee, however appointed, shall be a bank or trust company with trust powers incorporated and doing business in the United 15

States of America and having net worth of at least $150,000,000, if there be such an institution willing, able and legally qualified to perform the duties of Decommissioning Trustee hereunder upon reasonable or customary terms; provided however, that in calculating the $150,000,000 net worth requirement, the net worth of the Decommissioning Trustee's parent corporation and/or affiliates may be taken into account only if such entities guarantee Decommissioning Trustee's responsibilities to the Funds.

(iv) Any corporation into which Decommissioning Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which Decommissioning Trustee shall be a party, or any corporation to which substantially all the corporate trust business of Decommissioning Trustee may be transferred, shall, subject to the terms of subsection 14(A)(iii), be Decommissioning Trustee under this Agreement without further act.

(v) No successor Decommissioning Trustee (other than a successor by reason of an event described in Section 14(A)(iv)) shall be liable for any act, omission or breach of trust by a predecessor Decommissioning Trustee, whether or not such successor Decommissioning Trustee knows or should have known of such act, omission, or breach of trust, and shall have no duty to compel redress of any breach of trust by a predecessor Decommissioning Trustee.

(B) If a Fiduciary Investment Manager is appointed by El Paso hereunder, such appointment shall be made in writing; however, El Paso may not serve as a Fiduciary Investment Manager. A Fiduciary Investment Manager may resign at any time without cause by giving at least thirty (30) days prior written notice to El Paso, and El Paso may remove a Fiduciary Investment Manager at any time with or without cause by giving written notice to such Fiduciary Investment Manager. The resignation or removal of a Fiduciary Investment Manager is not conditioned on the acceptance of appointment by a successor Fiduciary Investment Manager under this Section 14; provided, however, that if a Fiduciary Investment Manager other than the Decommissioning Trustee resigns or is removed and is not replaced by El Paso, Decommissioning Trustee shall, at that time, assume all investment responsibilities of such Fiduciary Investment Manager.

(i) In appointing a Fiduciary Investment Manager, El Paso shall have the following duties which will be of a continuing nature:

(a) a duty to determine whether such Fiduciary Investment Manager's fee schedule for investment management services is reasonable when compared to other such managers; (b) a duty to investigate and determine whether the past performance of such Fiduciary Investment Manager in managing investments has been reasonable; (c) a duty to investigate and determine whether the financial stability and strength of such Fiduciary Investment Manager is adequate for purposes of liability; 16

(d) a duty to investigate and determine whether such Fiduciary Investment Manager is in compliance with the requirements of its investment management agreement and this Agreement as it relates to investments and to such Fiduciary Investment Manager; and (e) a duty to investigate any other factors which may bear on whether such Fiduciary Investment Manager is suitable.

SECTION 15. Successors and Assigns; Additional Parties. This Agreement shall be binding upon and inure to the benefit of each party and its successors and permitted assigns.

SECTION 16. Termination of Funds. If not otherwise terminated sooner in accordance with the terms of this Agreement, each Fund shall end on the earlier of (A) the date specified in a written agreement between El Paso and Decommissioning Trustee and (B) the date that is twenty-one (21) years less one day after the death of the last survivor of the descendants living on the Effective Date of this Agreement of Joseph P. Kennedy, the father of president John F. Kennedy. Upon such termination, all of the assets of the Funds shall be distributed to El Paso.

Notwithstanding the foregoing provisions of this Section 16, if one or both of the Funds shall be or become valid under Applicable Law for a period subsequent to the date set out in Section 16(B) (or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the creation of such a fund for a period in gross exceeding the period for which such Fund is hereinabove stated to extend and be valid), then such Fund shall not terminate as aforesaid but shall extend to and continue in effect until (but only if such nontermination and extension shall then be valid under Applicable Law) such time as such Fund shall, under Applicable Law, cease to be valid.

SECTION 17. Accountings; Tax Returns and Reports; Audits. Decommissioning Trustee shall keep a&curate and detailed records and accounts of all investments, receipts, disbursements and other transactions of the Funds. All accounts, books, and records relating to the Funds shall be open to inspection and audit at all reasonable times by El Paso, its designee or an applicable governmental agency having jurisdiction over the Funds.

Within thirty (30) business days after the end of each calendar month and within thirty (30) business days after the close of each annual accounting period of each Fund, and as soon as reasonably practicable after the resignation or removal of a Decommissioning Trustee has become effective, Decommissioning Trustee shall furnish to El Paso a written account setting forth all (A) investments, receipts, disbursements, and other transactions effected by it during such month or year, as applicable, or during the part of the month or year to the date any such resignation or removal is effective, as applicable, and containing a description of all assets, including but not limited to all securities, purchased and sold (the description of the securities purchased must state the price at which each individual security was purchased), the cost or net proceeds of sale, and the securities and investments held at the end of such period, (B) the gains or losses realized by each Fund upon sales or other disposition of its assets, (C) the increase or decrease in the value of each Fund, (D) the fair market values of each Fund, and (E) the liabilities (excluding liability for Decommissioning) of the Funds incurred or unpaid at the end of such period. Within three (3) business days after the end of each calendar month and within three (3) business days after the close of each annual accounting period of each Fund, and as soon as reasonably practicable after the resignation or removal of a Decommissioning Trustee 17

has become effective, Decommissioning Trustee shall also provide El Paso secured web-based access to the information described in clauses (A) - (E) of this Section 17. The accounting shall also furnish El Paso such other information as Decommissioning Trustee may possess and as may be necessary for El Paso, Decommissioning Trustee and/or a Fiduciary Investment Manager to comply with any reporting requirements applicable to any of such parties and/or the Funds. If the fair market value of an asset in a Fund is not available, when necessary for accounting or reporting purposes the fair market value of the asset shall be determined in good faith by Decommissioning Trustee, assuming an orderly liquidation at the time of such determination. In addition, upon the written request of El Paso, which may be at any time and from time to time, Decommissioning Trustee shall provide El Paso the fair market value of the assets in a Fund as of a date other than the last day of a month or an annual accounting period of a Fund. If there is a disagreement between the Decommissioning Trustee, a Fiduciary Investment Manager and/or any other party as to any act or transaction reported in an accounting, Decommissioning Trustee or the Fiduciary Investment Manager, as applicable, shall have the right to have such disagreement settled by a court of competent jurisdiction. Decommissioning Trustee shall make such other reports as may be agreed upon in writing with El Paso.

Decommissioning Trustee shall retain its records and accountings related to the Funds as long as necessary for the proper administration thereof and at least for any period required by any applicable law, but with respect to each record and account for not less than six (6) years following the creation thereof.

El Paso shall have the right to cause the books, records, and accounts of Decommissioning Trustee that relate to the Funds to be examined and audited by independent auditors designated by El Paso at such times as El Paso may determine, and Decommissioning Trustee shall make such books, records, and accounts available for such purposes at all reasonable times.

El Paso shall, with the cooperation of Decommissioning Trustee, prepare or, upon agreement of Decommissioning Trustee, authorize Decommissioning Trustee to prepare, such tax returns and other reports for or with respect to each Fund as may be required from time to time by Applicable Law.

SECTION 18. Rights of Decommissioning Trustee.

(A) Decommissioning Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Agreement or required by the Texas Trust Code, and no implied duties or obligations shall be read into this Agreement against Decommissioning Trustee except such as are required by the Texas Trust Code.

(B) Decommissioning Trustee shall not have any obligation to invest, manage, control, make any payment from, or otherwise deal with, the Funds except as expressly provided herein or in written guidelines or instructions received pursuant to the terms hereof.

(C) Decommissioning Trustee may rely and shall be protected in acting upon any certificate, statement, notice, or other writing believed by it to be genuine and to have been signed or presented by the proper party or parties, and unless it has actual knowledge to the contrary, Decommissioning Trustee shall not be bound to make any investigation into the facts or matters stated in any certificate, statement, notice, or other writing received by it.

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(D) In the administration of the Funds hereunder, Decommissioning Trustee may execute any of the trusts or powers hereof and perform its powers and duties hereunder directly or through agents or attorneys and may consult with counsel, accountants and other skilled persons to be selected and employed by it, and Decommissioning Trustee shall not be liable for anything done or omitted by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons to the extent permitted by law and to the extent no such action or omission constitutes negligence or willful misconduct by Decommissioning Trustee.

(E) With respect to any obligation of El Paso hereunder to indemnify Decommissioning Trustee, Decommissioning Trustee shall look solely to El Paso and shall not have any lien upon the assets of the Funds to secure such obligation.

SECTION 19. Notices.

(A) Except as otherwise provided in this Agreement, all notices under this Agreement shall be in writing and be effective upon receipt if delivered by (1) hand, (2) certified or registered United States Mail postage prepaid, or (3) facsimile, provided that service by facsimile after 5:00 p.m. local time of the recipient shall be deemed delivered on the following business day, as follows:

If notice is to the Trustee:

Bank of America Attention: El Paso Electric Company Relationship Manager 303 West Wall P.O. Box 270 Midland, TX 79702-0270 If notice is to the Grantor:

El Paso Electric Company Attention: Controller 123 W. Mills Avenue El Paso, Texas 79901 Facsimile (915) 521-4772 and, if the notice is sent for the purposes described in Sections 5, 14(A), 14(B), and 19(B), with a copy to:

El Paso Electric Company Office of the General Counsel 123 W. Mills Avenue El Paso, Texas 79901 Facsimile (915) 521-4747 (B) Each person may change its address for purposes of notice under this Agreement 19

by notice complying with Section 20(A).

Any notice required under this Agreement may be waived in writing by the party entitled thereto.

SECTION 20. Counterpart Execution. This Agreement may be executed in any number of counterparts and by each of the parties hereto on separate counterparts; all such counterparts shall together constitute but one and the same instrument.

SECTION 21. Effective Date. This Agreement shall become effective on the "Effective Date" as defined herein.

IN WITNESS WIHEREOF, each of the parties hereto has caused this Agreement to be duly executed as of the day and year above written.

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EL PASO:

EL PASO ELECTRIC COMPANY DECOMMISSIONING TRUSTEE:

BANK OF AMERICA, N.A., a national banking association By: Vic Tidt.,jVice Pres-ident-STATE OF TEXAS I SS.

COUNTY OF EL PASO A

The foregoing instrument was acknowledged before me this Si- day of by 1IcrtL D h)ix 'w of EL PASO ELECTRIC COMPANY, a Texas corporation, on behalf of said corporation.

Y'A)nk0AJP Notary Public My coussion expires:

Illa )*SQOcJ7 21

STATE OF TEXAS §

§ ss.

COUNTY OF MIDLAND § The foregoing instrument was acknowledged before me this 1 tk day of December, 2003 by John R. Peterson , Vice President of BANK OF AMERICA, N.A., a national banking association, on behalf of said association.

Notary Public My commission expires:

,02-7d xm 22

Appendix A to Decommissioning Trust Agreement for Palo Verde Nuclear Generating Station Unit 1 DEFINITION OF TERMS ANPP Participation Agreement shall mean the Arizona Nuclear Power Project Participation Agreement, dated as of August 23, 1973, as amended, among Arizona Public Service Company, Salt River Project Agricultural Improvement and Power District, Southern California Edison Company, Public Service Company of New Mexico, Southern California Public Power Authority, Department of Water and Power of The City of Los Angeles, and El Paso.

Applicable Law shall mean all applicable laws, statutes, treaties, rules, codes, ordinances, regulations, permits, certificates, orders, interpretations, licenses, and permits of any federal, state, county, municipal, foreign, international, regional, or other governmental authority, agency, board, body, instrumentality, or court, and judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator, or other judicial or quasi-judicial tribunal (including those pertaining to health, safety, the environment, or otherwise).

Applicable Tax Law shall mean Code Section 468A, any comparable subsequent provisions of the Code, the United States Treasury regulations promulgated under such section or provisions, and other provisions of the Code relating to the federal taxation of the Funds.

Code shall mean the Internal Revenue Code of 1986, as amended, or any successor law.

Decommissioning shall mean the decommissioning and retirement from service of Unit 1, and the related possession, maintenance, and disposal of material, radioactive or otherwise used in or produced by or relating to Unit 1, including, without limitation: (i) placement and maintenance in a state of protective storage; (ii) in-place entombment and maintenance; (iii) dismantlement; (iv) removal, decontamination and disposition of equipment and fixtures; (v) razing; (vi) removal and disposition of debris related to Unit 1 from the PVNGS Site; (vii) restoration of the PVNGS Site related to Unit I for unrestricted use; (viii) any other actions relating to decommissioning and retirement from service of Unit 1 required by the NRC; and (ix) all activities undertaken incident to the implementation thereof.

Decommissioning Cost shall mean El Paso's pro-rata share, under the ANPP Participation Agreement, of the greater of (i) the latest estimate of Termination Costs (as that term is defined by the ANPP Participation Agreement) for Unit 1 or (ii) the minimum amount required by the NRC to be funded for the decommissioning of Unit 1.

Deemed Distribution Amount shall mean an amount in the Decommissioning Trust Fund that is treated by Applicable Tax Law as having been distributed by reason of the disqualification of all or a part of such Fund.

Excess Contribution shall mean the amount by which cash payments made (or deemed made) by El Paso into the Decommissioning Trust Fund during any taxable year of El Paso exceeds the payment limitation imposed by Applicable Tax Law.

Expenses shall mean: (a) in the case of the Decommissioning Trust Fund, (i) the tax imposed by Code Section 468A(e)(2); (ii) any state or local tax imposed on the income or the assets of such Fund; and (iii) legal, accounting, and actuarial fees and expenses, trustee's fees and expenses, and all other ordinary administrative costs and incidental expenses, incurred by Decommissioning Trustee, a Fiduciary Investment Manager, or El Paso in connection with the operation of such Fund, but in each case only to the extent permitted by Code Section 468A(e)(4)(B) or other Applicable Tax Law to be paid from the assets of a "Nuclear Decommissioning Reserve Fund," as that term is used in Applicable Tax Law; and (b) in the case of the Second Fund, (i) any federal, state, or local tax actually paid by El Paso with respect to the income or the assets of such Fund including a payment to El Paso of the federal income tax (at the statutory rate) with respect to the taxable income of such Fund required to be included on El Paso's federal income tax return; and (ii) legal, accounting and actuarial expenses, trustee's fees and expenses, and all other ordinary administrative costs and incidental expenses, incurred by Decommissioning Trustee, a Fiduciary Investment Manager, or El Paso in connection with the operation of such Fund; provided, however, Expenses shall not include taxes on or with respect to fees paid to Decommissioning Trustee or a Fiduciary Investment Manager and taxes that Code Section 4951 requires be paid by Decommissioning Trustee.

Fiduciary Investment Manager shall mean any institution or professional appointed by El Paso, other than Decommissioning Trustee, who is responsible for the investment and reinvestment of the Funds.

License shall mean NRC Facility Operating License No. NPF-41, issued December 31, 1984, as the same may be amended, modified, extended, renewed or superseded from time to time.

NRC shall mean the Nuclear Regulatory Commission of the United States of America or any successor agency.

PVNGS shall mean the Palo Verde Nuclear Generating Station, which is located on the PVNGS Site.

PVNGS Site shall mean the real property located in Maricopa County, Arizona, approximately 36 miles west of the City of Phoenix, Arizona and approximately 16 miles west of the City of Buckeye, Arizona, which legal description is contained in Appendix B to the ANPP Participation Agreement.

Qualified Investments shall mean investments that meet the intent, standards, liabilities, and general and specific requirements and conditions on investments as set forth in Section 7 herein.

Unit 1 shall mean the 1,270 megawatt unit, commonly known as Unit 1, at PVNGS.

DECOMMISSIONING TRUST AGREEMENI N -

Dated as of December 18, 2003 between EL PASO ELECTRIC COMPANY and BANK OF AMERICA, N.A As Decommissioning Trustee for Palo Verde Unit 2

DECOMMISSIONING TRUST AGREEMENT FOR PALO VERDE NUCLEAR GENERATING STATION UNIT 2 This Decommissioning Trust Agreement (the "Agreement"), to be effective as of December 24, 2003 (the "Effective Date"), between Bank of America, N.A., a national banking association ("Decommissioning Trustee") and El Paso Electric Company, a Texas corporation

("El Paso").

The Nuclear Regulatory Commission ("NRC"), an agency of the United States of America, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974, has promulgated regulations codified in Title 10, Chapter 1 of the Code of Federal Regulations, Part 50, as amended. These regulations, applicable to El Paso, require that each holder of a license issued pursuant thereto must provide assurance that funds will be available for Decommissioning.

El Paso and others entered into the Arizona Nuclear Power Project Participation Agreement executed as of August 23, 1973 (the "ANPP Participation Agreement").

Amendment 13 to the ANPP Participation Agreement, effective June 15, 1991, requires El Paso to establish and maintain funds for the accumulation, over a period not in excess of the remaining term of the operating license for Unit 2 and the period thereafter until completion of Decommissioning, of funds sufficient to pay Decommissioning Cost.

In addition, El Paso is required by the Public Utility Commission of Texas ("PUCT"),

the New Mexico Public Regulation Commission ("NMPRC"), the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission to establish a source of funds to pay for Decommissioning.

Under Applicable Tax Law, certain federal income tax benefits are available to El Paso from establishing and making contributions to a "Nuclear Decommissioning Reserve Fund" for Unit 2. In order to satisfy its obligations under the ANPP Participation Agreement, to comply with the requirements of the governmental authorities referred to above, and to obtain such federal income tax benefits, on April 1, 1986, El Paso entered into a Decommissioning Trust Agreement, which was amended by Amendment No. 1 dated September 1, 1991 (the "Original Agreement"), creating two decommissioning trust funds to provide external funds for Decommissioning, for purposes of this Agreement designated as the Decommissioning Trust Fund and the Second Fund. The Decommissioning Trust Fund is intended at all times to qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law.

On January 9, 1996, in Cause No. 92-10148-FM, styled In re: El Paso Electric Company, the United States Bankruptcy Court for the Western District of Texas (Austin Division) entered an order confirming the Fourth Amended Plan of Reorganization of El Paso (the "Plan"). In accordance with the Plan, which became effective on February 12, 1996, El Paso and Decommissioning Trustee restated and amended the Original Agreement to ensure that the Decommissioning Trust Fund and the Second Fund would continue to be held, managed and distributed, without interruption, in accordance with the terms of the Original Agreement, Applicable Law, and Applicable Tax Law.

2

This Agreement, in turn, amends and restates the Original Agreement, as restated and amended effective February 12, 1996, to read in its entirety as follows and continues the Decommissioning Trust Fund and the Second Fund.

Therefore, in consideration of the foregoing premises, the acceptance by Decommissioning Trustee of the trusts created, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto restate and amend the Original Agreement, as restated and amended effective February 12, 1996, as follows:

SECTION 1. Definitions; References to Sections. All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings set forth in Appendix A hereto. Unless otherwise stated, references to a "Section" are to a section of this Agreement.

SECTION 2. Creation of Trust Funds. El Paso has established and hereby confirms the establishment with Decommissioning Trustee of the Decommissioning Trust Fund and the Second Fund (each a "Fund" and together the "Funds"). Each Fund shall include: (A) all cash and investments thereof, as more specifically described in Section 7; (13) all dividends, interest, cash, instruments, and other property from time to time received, receivable, or otherwise distributed or distributable in respect of or in exchange for any or all such investments; (C) all rights and privileges with respect to such investments; and (D) all proceeds of any of the foregoing and any property of any character whatsoever into which any of the foregoing may be converted.

SECTION 3. Purpose of Trust Funds; Tax Qualification. The Funds are for the accumulation and funding of amounts to pay costs, liabilities, and expenses of Decommissioning, including the accumulation, over a period not in excess of the remaining term of the operating license for Unit 2 and the period thereafter until completion of Decommissioning, of amounts which are sufficient to pay Decommissioning Cost. The Decommissioning Trust Fund, but not the Second Fund, is intended at all times to qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law. El Paso and the applicable Fiduciary Investment Manager(s), if any, and Decommissioning Trustee (but with respect to Decomnmissioning Trustee only as to those assets of the Funds that are not under the direction of a Fiduciary Investment Manager) shall seek to obtain the best possible tax treatment of amounts collected for nuclear plant decommissioning; and in this regard, El Paso and the applicable Fiduciary Investment Manager(s), if any, and Decommissioning Trustee (but with respect to Decommissioning Trustee only as to those assets of the Funds that are not under the direction of a Fiduciary Investment Manager) shall take maximum advantage of tax deductions and credits when it is consistent with sound business practices to do so. The assets of the Decommissioning Trust Fund must be used as authorized by section 468A of the Code and shall be used exclusively:

(A) subject to the limitations and conditions of Section 9, to satisfy, in whole or in part, El Paso's obligation to pay for Decommissioning; (B) subject to the limitations and conditions of Section 8, to pay Expenses; and (C) to the extent not currently required for the uses described in (A) and (B) above, and subject to the limitations and conditions of Section 7, for investment in Qualified Investments.

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The Funds shall be used exclusively for Decommissioning of Unit 2. This Agreement may not be amended so as to violate section 468A of the Code or the regulations there under.

SECTION 4. Declaration and Acceptance of Trust. Decommissioning Trustee accepts the trusts created hereby and declares that it will hold and administer all estate, right, title, and interest in and to each Fund upon the trusts set forth herein, but only on the terms of this Agreement, and agrees to receive and disburse all moneys and investments constituting any part of each Fund in accordance with this Agreement. No implied duties or obligations shall be read into this Agreement against Decommissioning Trustee. Decommissioning Trustee shall not commit any act, enter into any transaction, or permit any act or transaction to occur that is an "act of self dealing" between the Decommissioning Trust Fund and "a disqualified person" as those terms are defined by Applicable Tax Law, and, if such an act occurs, Decommissioning Trustee shall promptly take all necessary steps to correct it as soon as it has knowledge of the occurrence.

SECTION 5. Ownership of Funds. Not in limitation of its fiduciary duty hereunder, title to any and all property held in each Fund shall be held by Decommissioning Trustee in its name as trustee as owner of record. At all times, Decommissioning Trustee shall follow the directives of (A) the applicable Fiduciary Investment Manager, if any, with respect to exercising any and all corresponding voting, consensual, and other rights accruing to the owner of such property in connection with such property, and, except as provided in this subsection 5.(A), (B)

El Paso with respect to exercising any and all such voting, consensual, and other rights.

Decommissioning Trustee shall have the right, in its name, as trustee upon prior written notice to El Paso, to settle, compromise, prosecute, or defend any action, claim, or proceeding with respect to any and all property held in each Fund. Subject to the provisions of this Agreement, Decommissioning Trustee may sell, assign, endorse, pledge, transfer, and make any agreement respecting, or otherwise deal with, any and all property held in each Fund; provided, however, that except as required by Section 7, nothing herein contained shall be construed as requiring or obligating Decommissioning Trustee to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim or notice, or to take any action with respect to any of the property held in each Fund. It is not the duty of Decommissioning Trustee or a Fiduciary Investment Manager to ensure that the Funds are adequate to pay for Decommissioning.

SECTION 6. Payments into the Funds. From time to time, but not less than yearly, El Paso shall pay amounts into one or both of the Funds. El Paso may deposit all or any part of any payment entirely into the Decommissioning Trust Fund, entirely into the Second Fund, or partly into each in whatever proportion El Paso shall determine in its discretion; except that, if a deduction is allowed under Applicable Tax Law for payments into the Decommissioning Trust Fund, El Paso shall not make, and Decommissioning Trustee shall not accept, any payment into such Fund unless such payment (a) is in cash, to the extent Applicable Tax Law requires the payment to be in cash, and (b) complies with the amount limitation imposed by Applicable Tax Law and a deduction pursuant to Applicable Tax Law is allowed for the entire payment.

Decommissioning Trustee may accept from El Paso, as proof that these conditions are satisfied, a certificate executed by El Paso as to compliance with the amount limitation and deductibility of such payment, and, unless Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee may rely on such certificate without further inquiry or verification.

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SECTION 7. Investment of Funds.

(A) Decommissioning Trustee. Any amounts held by Decommissioning Trustee in each Fund shall be invested and reinvested by it from time to time, but only in Qualified Investments; provided, however, if El Paso has delivered to Decommissioning Trustee a copy of an order of a state or federal regulatory agency that El Paso certifies is binding on El Paso and limits the investments in which all or a part of either Fund may be invested, the investment of such Fund shall not violate such order. A Fiduciary Investment Manager appointed by El Paso may direct investments and reinvestments of the Funds by written direction which shall certify that the directed investment qualifies as an investment in Qualified Investments and is within the limitation set forth in the preceding sentence. Decommissioning Trustee may rely upon such direction and certification without further inquiry or verification unless Decommissioning Trustee has actual knowledge that the directed investment does not satisfy the conditions and limitations of this Section 7.

In performing its duties and exercising its powers as Decommissioning Trustee hereunder, and in performing any investment management functions hereunder, Decommissioning Trustee shall comply with the following:

(i) it shall add all income, including interest, earned on the corpus of each Fund to such corpus as a part thereof, and shall owe the same duties with regard to such income as it owes with regard to such corpus; (ii) it shall have the continuing duty to review the assets of each Fund to determine the appropriateness of the investments consistent with all terms, provisions and limitations of this Agreement, including without limitation to ensure compliance with the provisions of the investment guidelines of this Section 7, any order of a state or regulatory agency limiting investments that El Paso has delivered and certified to Decommissioning Trustee as provided above, and any other applicable governing regulations; (iii) it shall not lend all or any part of either Fund to itself or to any of its officers or directors or permit any act of "self-dealing" prohibited by Applicable Tax Law; (iv) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, itself or any of its officers or directors, except that, if El Paso directs it to do so in writing, it may invest or reinvest amounts in the Funds in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, and except that, if El Paso directs it to do so in writing, it may invest amounts in the Funds in mutual funds that contain securities issued by Decommissioning Trustee provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; (v) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, El Paso, its subsidiaries or affiliates or their successors or assigns, except that, if El Paso approves in writing, it may invest or reinvest amounts in the Funds in mutual funds that contain securities issued by El Paso provided such 5

securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; and (vi) Notwithstanding anything to the contrary in this Agreement, if directed by El Paso, Decommissioning Trustee shall hold and maintain one or both of the Funds in a segregated account and invest and administer such Fund(s) separately from the assets of Decommissioning Trustee or other trusts.

(B) Fiduciar Investment Manager. Any amount of each Fund directed to be invested by a Fiduciary Investment Manager shall be invested and reinvested by Decommissioning Trustee as directed by such Fiduciary Investment Manager from time to time, but only in Qualified Investments; provided, however, if El Paso has delivered to a Fiduciary Investment Manager a copy of an order of a state or federal regulatory agency that El Paso certifies is binding on El Paso and limits the investments in which all or a part of a Fund may be invested, the investment of such Fund shall not violate such order. A Fiduciary Investment Manager appointed by El Paso may direct investments and reinvestments of the Funds by written direction which shall certify that the directed investment qualifies as an investment in Qualified Investments and is within the limitation set forth in the preceding sentence. Decommissioning Trustee may rely upon such written direction and certification without further inquir~y or verification unless Decommissioning Trustee has actual knowledge that the directed investment does not satisfy the conditions and limitations of this Section 7.

In performing its duties and exercising its powers as a Fiduciary Investment Manager hereunder, a Fiduciary Investment Manager shall comply with the following:

(i) it shall direct the addition of all income, including interest, earned on the corpus of each Fund subject to its direction to such corpus as a part thereof, and shall owe the same duties with regard to such income as it owes with regard to such corpus; (ii) it shall have a continuing duty to review the assets of each Fund subject to its direction to determine the appropriateness of the investments consistent with all terms, provisions and limitations of this Agreement, including without limitation to ensure compliance with the provisions of the investment guidelines of this Section 7, any order of a state or regulatory agency limiting investments that El Paso has delivered to such Fiduciary Investment Manager as hereinabove provided and any other applicable governing regulations; I(iii) it shall not direct the lending of all or any part of either Fund to itself or to any of its officers or directors or permit any act of "self-dealing" prohibited by Applicable Tax Law; (iv) it shall not direct the investment or reinvestment of amounts in either Fund with, or in any instrument or security issued by, itself or any of its officers or directors; (y) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, Decommissioning Trustee or any of Decommissioning Trustee's officers or directors, except that, if El Paso directs it to do so in writing, it may invest or reinvest amounts in the Funds in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, and except that, if El Paso directs it to do 6

so in writing, it may invest amounts in the Funds in mutual funds that contain securities issued by Decommissioning Trustee provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; (vi) it shall not direct the investment or reinvestment of amounts in either Fund with, or in any instrument or security issued by El Paso, its subsidiaries or affiliates or associates or their successors or assigns of El Paso, except that, if El Paso approves in writing, it may direct the investment or reinvestment of amounts in the Funds in mutual funds that contain securities issued by El Paso provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; and (vii) it shall provide Decommissioning Trustee directives concerning voting, consensual, and other rights and powers accruing in connection with assets of the Funds subject to such Fiduciary Investment Manager's direction.

(C) General. It is the intent of El Paso that neither Decommissioning Trustee nor a Fiduciary Investment Manager shall have any powers that are greater than those provided to trustees under the Texas Trust Code or that are inconsistent with the limitations that are set out in this Section 7.

(D) Investments Standards. To the extent not inconsistent with the other provisions of this Section 7 and to the extent that Decommissioning Trustee does not currently require the assets of the Funds for the purpose of satisfying the liability of El Paso for Decommissioning and to pay Expenses:

(i) 'Decommissioning Trustee shall, in connection with investing and reinvesting assets of the Funds, exercise the same standard of care that a reasonable person would exercise in the same circumstances; provided, however, that this subsection 7.(D)(i) shall apply only as to those assets of the Funds that are not subject to the direction of a Fiduciary Investment Manager; and (ii) a Fiduciary Investment Manager appointed to direct the investment and reinvestment of all or any portion of the assets of the Funds shall, with respect to such assets subject to its direction, exercise the same degree of care that a reasonable person would exercise in the same circumstances.

For purposes of this subsection entitled "Investment Standards", a "reasonable person" means a prudent investor as described in Chapter 117, Uniform Prudent Investor Act, of the Texas Property Code.

(E) Qualified Investments. Qualified Investments include those investments meeting the investment standards, limitations, conditions, and requirements prescribed in the foregoing subsections of this Section 7 and the following criteria which may be amended by El Paso upon written notice to Decommissioning Trustee and each Fiduciary Investment Manager.

(i) Investment Portfolio Goals. The Funds shall be invested consistent with the goals set forth in this subsection 7.(E)(i).

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(a) Assets of the Decommissioning Trust Fund shall be invested only as permitted for a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law.

(b) Assets of the Funds shall be invested with a goal of earning a reasonable return commensurate with the need to preserve the value of the assets of the Funds.

(c) In keeping with prudent investment practices, the portfolio of securities held in the Funds shall be diversified to the extent reasonably feasible given the size of the Funds.

(d) Asset allocation and the acceptable risk level of the assets of the Funds should take into account market conditions, the time horizon remaining before the commencement and completion of Decommissioning, and the funding status of the Funds. While maintaining an acceptable risk level consistent with the goal referenced in subsection 7.(E)(i)(b) of this Section 7, the investment emphasis when the remaining life of the liability, as defined in subsection 7.(E)(ii)(d)(4) of this subsection, exceeds five years should be to maximize net long-term earnings. The investment emphasis in the remaining investment period of the Funds should be on current income and the preservation of each Fund's assets.

(e) In selecting investments, the impact of the investment on the volatility and expected return of the assets of the Funds, net of fees, commissions, expenses, and taxes should be considered.

(ii) General Requirements. The restrictions contained in this subsection 7.(E)(ii)apply to the Decommissioning Trust Fund and Second Fund in the aggregate.

For purposes of this subsection 7.(E)(ii), a commingled funds is defined as a professionally managed investment fund of fixed-income or equity securities established by an investment company regulated by the Securities Exchange Commission or a bank regulated by the Office of the Comptroller of the Currency.

(a) Diversification. For the purpose of this subsection 7.(E)(ii)(a), a commingled or mutual fund is not considered a security; rather, the diversification standard applies to all securities, including the individual securities held in commingled or mutual funds. Once the portfolio of securities (including those held in commingled or mutual funds) held in the Funds contains securities with an aggregate value in excess of $20 million, it shall be diversified such that:

(1) no more than five percent (5%) of the securities held may be issued by one entity, with the exception of the federal government, its agencies and instrumentalities; and 8

(2) the portfolio shall contain at least 20 different issues of securities, and municipal securities and real estate investments shall be diversified as to geographic region.

(b) Derivatives. The use of derivative securities in the Funds is limited to those whose purpose is to enhance returns of the Funds without a corresponding increase in risk or to reduce risk of the assets of the Funds. Derivatives may not be used to increase the value of the assets of the Funds by any amount greater than the value of the underlying securities. Prohibited derivative securities include, but are not limited to, mortgage strips; inverse floating rate securities; leveraged investments or internally leveraged securities; residual and support tranches of collateralized mortgage obligations; tiered index bonds or other structured notes whose return characteristics are tied to non-market events; uncovered call/put options; large counter-party risk through over-the-counter options, forwards and swaps; and instruments with similar high-risk characteristics.

(c) Leverage. The use of leverage (borrowing) to purchase securities or the purchase of securities on margin for a Fund is prohibited.

(d) Investment limits in equity securities. The following investment limits shall apply to the percentage of the aggregate market value of all non-fixed income investments relative to the total portfolio market value:

(1) except as noted in subsection 7.(E)(2)(b), when the weighted average remaining life of the liability exceeds 5 years, the equity cap shall be sixty percent (60%);

(2) when the weighted average remaining life of the liability ranges between 5 years and 2.5 years, the equity cap shall be thirty percent (30%). Additionally, during all years in which expenditures for Decommissioning occur, the equity cap shall also be thirty percent (30%);

(3) when the weighted average remaining life of the liability is less than 2.5 years, the equity cap shall be zero percent (0%);

(4) for purposes of this subsection 7.(E)(ii)(4), the weighted average remaining life in any given year is defined as the weighted average of years between the given year and the years of each Decommissioning outlay, where the weights are based on each year's expected Decommissioning expenditures divided by the amount of the remaining liability in that year; and 9

(5) should the market value of non-fixed income investments, measured monthly, exceed the appropriate cap due to market fluctuations, the market value of the non-fixed income investments shall be reduced below the cap as soon as practicable. Such reductions may be accomplished by investing all future contributions to a Fund in debt securities as is necessary to reduce the market value of the non-fixed income investments below the cap, or if prudent, by the sale of equity securities.

(iii) Specific Investment Restrictions. The restrictions contained in this subsection 7.(E)(iii). apply to the Decommissioning Trust Fund and the Second Fund in the aggregate.

(a) Fixed-income investments. Assets of the Funds shall not be invested in corporate or municipal debt securities that have a bond rating below investment grade "BBB-" by Standard & Poor's Corporation or "Baa3" by Moody's Investor's Service) at the time that the securities are purchased. If the debt rating of a company or municipality issuing the particular debt security falls below investment grade at some time after the security was purchased, the appropriateness of continuing to hold such security shall be reexamined. The overall portfolio of debt instruments shall have a quality level, measured quarterly not below an "AA" grade by Standard & Poor's Corporation or "Aa2" by Moody's Investor's Service. In calculating the quality of the overall portfolio, debt securities issued by the federal government shall be considered as having an "AAA" rating.

(b) Equity Investments.

(1) At least seventy percent (70%) of the aggregate market value of the equity assets of the Funds, including the individual securities in commingled funds, shall have a quality ranking from a major rating service such as the earnings and dividend ranking for common stock by Standard and Poor's or the quality rating of Ford Investor Services. Further, the overall portfolio of ranked equities shall have a weighted average quality rating equivalent to the composite rating of the Standard and Poor's 500 Index assuming equal weighting of each ranked security in the Index. If the quality rating, measured quarterly, falls below the minimum quality standard, the quality level of the equity assets of the Funds shall be increased to the required level as soon as is practicable and prudent: and (2) assets of the Funds shall not be invested in equity securities if the issuer has a capitalization of less than $100 million.

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(c) Commingled funds. The following guidelines shall apply to the investments made through commingled funds. Examples of commingled funds appropriate for investment by nuclear decommissioning trust funds include United States equity-indexed funds, actively managed United States equity funds, balanced funds, bond funds, real estate investment trusts, and international funds.

(1) The commingled funds should be selected consistent with the investment goals specified in subsection 7.(E)(ij and the general requirements in subsection 7.(E)(ii);

(2) in evaluating the appropriateness of a particular commingled fund, the following duties shall be of a continuing nature:

(I) a duty to determine whether the fund manager's fee schedule for managing the fund is reasonable, when compared to fee schedules of other such managers; (II) a duty to investigate and determine whether the past performance of the investment manager in managing the commingled fund has been reasonable relative to prudent investment and utility decommissioning trust practices and standards; and (III) a duty to investigate the reasonableness of the net after-tax return and risk of the commingled fund relative to similar funds, and the appropriateness of the commingled fund within all of the assets of the Funds; (3) the payment of load fees shall be avoided; and (4) commingled funds focused on specific market sectors or concentrated in a few holdings shall be used only as necessary to balance the Funds' overall investment portfolio mix.

Notwithstanding any other provision of this Section 7, nothing in this Section 7 shall be construed to permit any investment otherwise prohibited by any other provision of this Agreement, Applicable Law, or Applicable Tax Law. This Agreement and the investments of the Funds shall be interpreted and construed in a manner consistent with the parties' intention that this Agreement and the Funds at all times comply with all requirements of the Nuclear Regulatory Commission and other applicable governmental regulations and rules, including without limitation the rules of the PUCT, the NMPRC, and the Federal Energy Regulatory Commission, including but not limited to the "Final Rule" regarding the formation, organization and purposes of nuclear plant decommissioning trust funds and for fund investments issued June 16, 1995, as may be amended from time to time.

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SECTION 8. Expenses; Indemnification. El Paso shall pay all Expenses and, subject to Section 9.(D), may direct Decommissioning Trustee, in writing, to pay specified Expenses of a Fund from such Fund. El Paso shall certify in writing to Decommissioning Trustee whether and the extent to which an item is an Expense of a specified Fund and whether Applicable Tax Law permits its payment out of the assets of the Fund; and Decommissioning Trustee may, unless it has actual knowledge to the contrary, rely upon such certification without further inquiry or verification.

Except to the extent Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee shall be fully protected in relying upon the existence of any fact or state of facts represented to it in writing by El Paso or a duly appointed Fiduciary Investment Manager.

Except with respect to liability or fiduciary responsibility for any error or loss that may result by reason of the exercise or non-exercise of the duties, obligations, and/or fiduciary responsibility which are allocated to Decommissioning Trustee herein which is determined to be the result of Decommissioning Trustee's own negligence or willful misconduct, El Paso shall indemnify Decommissioning Trustee, directly from El Paso's own assets (including the proceeds of any insurance policy the premiums of which are paid from El Paso's own assets), from and against any and all claims, demands, losses, damages, expenses (including, by way of illustration and not limitation, reasonable attorneys' fees and other legal and litigation costs), judgments, and liabilities arising from, out of, or in connection with the administration or investment of the Funds. Decommissioning Trustee shall not be liable for any action taken by Decommissioning Trustee or any failure to act by Decommissioning Trustee if the action taken or the failure to act was directed by El Paso or a Fiduciary Investment Manager, if Decommissioning Trustee reasonably relied on such direction. This Section 8 shall survive the termination of this Agreement.

SECTION 9. Payments and Distributions from the Funds.

(A) Subject to the other provisions of this Section 9, Decommissioning Trustee shall make payments out of the Funds upon presentation by El Paso of (A) a certificate signed by El Paso (i) instructing Decommissioning Trustee to disburse amounts in the Funds in a manner designated in such certificate for purposes of paying for Decommissioning and (ii) certifying that disbursements, if any, directed to be made from assets of the Decommissioning Trust Fund are for payment of only those costs, liabilities, and expenses of Decommissioning that qualify as "nuclear decommissioning costs" under Applicable Tax law, and (B) documentation reasonably acceptable to Decommissioning Trustee that such payment for Decommissioning is due and payable.

(B) Upon termination of the Decommissioning Trust Fund under Applicable Tax Law, El Paso may direct Decommissioning Trustee to transfer all property remaining in the Decommissioning Trust Fund to El Paso for disbursement or distribution as may then be provided by law. In addition, upon its receipt of a certificate signed by El Paso certifying that Decommissioning has been completed under Applicable Law and all costs of Decommissioning have been paid in full, all property then held in both Funds shall be paid by Decommissioning Trustee to El Paso for disbursement or distribution as may then be provided by law and the Funds shall terminate.

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(C) At any time and from time to time El Paso may direct Decommissioning Trustee in writing to, and upon receipt of such direction Decommissioning Trustee shall, subject to the applicable provisions of Section 9.(D), distribute to El Paso for disbursement or distribution as then may be provided or permitted by law or transfer from the Decommissioning Trust Fund to the Second Fund any:

(i) Deemed Distribution Amount that El Paso certifies in writing is deemed distributed under Applicable Tax Law; (ii) Excess Contribution that El Paso certifies in writing (a) has occurred under Applicable Tax Law, and (b) is being transferred within the time permitted for withdrawal or transfer of such Excess Contribution by Applicable Tax Law; and (iii) amount that El Paso certifies in writing may be transferred to the Second Fund in accordance with Applicable Law and Applicable Tax Law by reason of the disposition of all or a part of El Paso's interest in or license to possess Unit 2.

(D) Notwithstanding any other provision in this Agreement, except for (i) payments made under Section 8 for Expenses, (ii) to the extent allowed by Applicable Law, Deemed Distribution Amounts and Excess Contributions transferred to the Second Fund or distributed to El Paso under Section 9.(C), and (iii) withdrawals made pursuant to 10 C.F.R. 50.82(a)(8) no disbursement or payment from the Funds shall be made unless (a) thirty (30) business days prior written notice of the intention to make such disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, and the Director, Office of Nuclear Material Safety and Safeguards, and (b) Deconmmissioning Trustee has not received written notice of an objection during such thirty (30) day period from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards,. The notices required by this Sectidn 9.(D) may be made by or on behalf of Decommissioning Trustee.

(E) Unless Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee shall be fully protected in relying upon any certificate described in Section 9 without further inquiry or verification.

SECTION 10. Further Assurances. El Paso agrees that it will, at its sole expense, do all such further acts and things and execute and deliver all such additional conveyances, assignments, agreements, and instruments, as may be necessary or desirable or as Decommissioning Trustee may at any time reasonably request in connection with the administration and enforcement of this Agreement, or relative to the Funds or any part thereof, or in order to assure and confirm unto Decommissioning Trustee its rights, powers, and remedies hereunder.

El Paso may provide general investment policies in writing to Decommissioning Trustee or a Fiduciary Investment Manager, but may not engage in the day-to-day management of the Funds or mandate, or itself make, individual investment decisions except to the extent that El Paso retains the right under this Agreement to approve investments in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, in mutual funds that contain securities issued by Decommissioning Trustee (subject to the limitations elsewhere herein set forth), or in mutual funds that contain securities issued by El Paso, its subsidiaries or affiliates or their successors or assigns (subject to the limitations elsewhere herein set forth).

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El Paso will regularly supply to Decommissioning Trustee and to each Fiduciary Investment Manager, and regularly update, essential information about Unit 2 including its description, useful life, the Decommissioning plan that El Paso intends to follow, El Paso's anticipated liquidity needs once Decommissioning begins, and any other information that Decommissioning Trustee and a Fiduciary Investment Manager need to construct and maintain, over time, a sound investment plan for the Funds.

SECTION 11. Irrevocability and Modification. This Agreement is irrevocable and may not be amended or modified except by a writing signed by the parties hereto and approved, to the extent required by Applicable Law, by applicable regulatory authority(s). The parties agree that they will execute any amendments requested by El Paso that are necessary to secure and maintain the qualification of the Decommissioning Trust Fund as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law and the deduction of contributions to such Fund as provided by such law, or to comply with Applicable Law.

Not in limitation of the foregoing, if and to the extent that, now or in the future, federal tax law may extend certain tax benefits to a trust fund or funds that are created and maintained by El Paso for creation of a reserve or funds for costs associated with Decommissioning (hereinafter in this Section 11 referred to as such "other trusts") which such other trusts would qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law, including without limitation, Internal Revenue Code section 468A, only if established and maintained pursuant to a single trust agreement for a particular nuclear power plant, the parties hereto, upon the creation of such other trusts may amend this Agreement by attaching hereto as an allonge the governing instruments by which such other trusts may be created. In such event, such other trusts shall be administered under the terms of this Agreement to the extent not inconsistent with the governing instruments by which such other trusts may be created and such other trusts shall thereafter be administered as separate funds under the terms of this Agreement.

SECTION 12. Obligation for Decommissioning. Nothing in this Agreement and no act or omission relating to the Funds shall be read, construed, understood, or interpreted to place any obligation whatsoever on Decommissioning Trustee or a Fiduciary Investment Manager relating to Decommissioning or any Decommissioning Cost, all of which shall at all times remain the sole obligation of El Paso.

SECTION 13. Governing Law. This Agreement shall be deemed to be a contract made in Texas for all purposes and shall be construed in accordance with and governed by the laws of such State, including the provisions of the Texas Trust Code, with respect to all matters of construction, validity, and performance.

SECTION 14. Resignation and Replacement of Decommissioning Trustee or Fiduciary Investment Manager.

(A) Decommissioning Trustee may resign at any time without cause by giving at least 30 days prior written notice to El Paso, and El Paso may remove Decommissioning Trustee at any time with or without cause by giving written notice to Decommissioning Trustee, such resignation or removal to be effective on the acceptance of appointment by a successor Decommissioning Trustee under this Section 14. In case of the resignation or removal of Decommissioning Trustee, El Paso may appoint a successor Decommissioning Trustee by an 14

instrument signed by El Paso. If a successor Decommissioning Trustee shall not have been appointed by El Paso within 30 days after the giving of such written notice of resignation or removal, Decommissioning Trustee or El Paso may apply to any court of competent jurisdiction to appoint a successor Decommissioning Trustee to act until such time, if any, as a successor Decommissioning Trustee shall have been appointed by El Paso and shall have accepted its appointment under this Section 14. Any successor Decommissioning Trustee so appointed by such court shall immediately and without further act be superseded by any successor Decommissioning Trustee appointed by El Paso as provided above.

(i) In appointing a Decommissioning Trustee, El Paso shall have the following duties which will be of a continuing nature:

(a) a duty to determine whether Decommissioning Trustee's fee schedule for administering the trust is reasonable when compared to other institutional trustees rendering similar services; (b) a duty to investigate and determine whether the past administration of trusts by Decommissioning Trustee has been reasonable; (c) a duty to investigate and determine whether the financial stability and strength of Decommissioning Trustee is adequate; (d) a duty to investigate and determine whether Decommissioning Trustee is in compliance with the requirements of this Agreement; and (e) a duty to investigate any other factors which may bear on whether Decommissioning Trustee is suitable.

(ii) Any successor Decommissioning Trustee, however appointed, shall execute and deliver to the predecessor Decommissioning Trustee an instrument accepting such appointment, and thereupon such successor Decommissioning Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties, and trusts of the predecessor Decommissioning Trustee with like effect as if originally named as Decommissioning Trustee herein; and such predecessor Decommissioning Trustee shall duly assign, transfer, deliver, and pay over to such successor Decommissioning Trustee all moneys or other property then held by such predecessor Decommissioning Trustee upon the trusts expressed in this Agreement, shall do all acts necessary to vest title of record in such successor Decommissioning Trustee, and shall transfer and deliver to such successor Decommissioning Trustee copies of all records pertaining to the Funds and this Agreement. In addition, upon the written request of such successor Decommissioning Trustee, such predecessor Decommissioning Trustee shall execute and deliver to such successor Decommissioning Trustee an instrument transferring to such successor Decommissioning Trustee, upon the trusts expressed in this Agreement, all the estates, properties, rights, power, duties, and trusts of such predecessor Decommissioning Trustee.

(iii) Any successor Decommissioning Trustee, however appointed, shall be a bank or trust company with trust powers incorporated and doing business in the United 15

States of America and having net worth of at least $150,000,000, if there be such an institution willing, able and legally qualified to perform the duties of Decommissioning Trustee hereunder upon reasonable or customary terms; provided however, that in calculating the $150,000,000 net worth requirement, the net worth of the Decommissioning Trustee's parent corporation and/or affiliates may be taken into account only if such entities guarantee Decommissioning Trustee's responsibilities to the Funds.

(iv) Any corporation into which Decommissioning Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which Decommissioning Trustee shall be a party, or any corporation to which substantially all the corporate trust business of Decommissioning Trustee may be transferred, shall, subject to the terms of subsection 14(A)(iii), be Decommissioning Trustee under this Agreement without further act.

(v) No successor Decommissioning Trustee (other than a successor by reason of an event described in Section 14(A)(iv)) shall be liable for any act, omission or breach of trust by a predecessor Decommissioning Trustee, whether or not such successor Decommissioning Trustee knows or should have known of such act, omission, or breach of trust, and shall have no duty to compel redress of any breach of trust by a predecessor Decommissioning Trustee.

(B) If a Fiduciary Investment Manager is appointed by El Paso hereunder, such appointment shall be made in writing; however, El Paso may not serve as a Fiduciary Investment Manager. A Fiduciary Investment Manager may resign at any time without cause by giving at least thirty (30) days prior written notice to El Paso, and El Paso may remove a Fiduciary Investment Manager at any time with or without cause by giving written notice to such Fiduciary Investment Manager. The resignation or removal of a Fiduciary Investment Manager is not conditioned on the acceptance of appointment by a successor Fiduciary Investment Manager under this Section 14; provided, however, that if a Fiduciary Investment Manager other than the Decommissioning Trustee resigns or is removed and is not replaced by El Paso, Decommissioning Trustee shall, at that time, assume all investment responsibilities of such Fiduciary Investment Manager.

(i) In appointing a Fiduciary Investment Manager, El Paso shall have the following duties which will be of a continuing nature:

(a) a duty to determine whether such Fiduciary Investment Manager's fee schedule for investment management services is reasonable when compared to other such managers; (b) a duty to investigate and determine whether the past performance of such Fiduciary Investment Manager in managing investments has been reasonable; (c) a duty to investigate and determine whether the financial stability and strength of such Fiduciary Investment Manager is adequate for purposes of liability; 16

(d) a duty to investigate and determine whether such Fiduciary Investment Manager is in compliance with the requirements of its investment management agreement and this Agreement as it relates to investments and to such Fiduciary Investment Manager; and (e) a duty to investigate any other factors which may bear on whether such Fiduciary Investment Manager is suitable.

SECTION 15. Successors and Assigns; Additional Parties. This Agreement shall be binding upon and inure to the benefit of each party and its successors and permitted assigns.

SECTION 16. Termination of Funds. If not otherwise terminated sooner in accordance with the terms of this Agreement, each Fund shall end on the earlier of (A) the date specified in a written agreement between El Paso and Decommissioning Trustee and (B) the date that is twenty-one (21) years less one day after the death of the last survivor of the descendants living on the Effective Date of this Agreement of Joseph P. Kennedy, the father of president John F. Kennedy. Upon such termination, all of the assets of the Funds shall be distributed to El Paso.

Notwithstanding the foregoing provisions of this Section 16, if one or both of the Funds shall be or become valid under Applicable Law for a period subsequent to the date set out in Section 16(B) (or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the creation of such a fund for a period in gross exceeding the period for which such Fund is hereinabove stated to extend and be valid), then such Fund shall not terminate as aforesaid but shall extend to and continue in effect until (but only if such nontermination and extension shall then be valid under Applicable Law) such time as such Fund shall, under Applicable Law, cease to be valid.

SECTION 17. Accountings; Tax Returns and Reports; Audits. Decommissioning Trustee shall keep accurate and detailed records and accounts of all investments, receipts, disbursements and other transactions of the Funds. All accounts, books, and records relating to the Funds shall be open to inspection and audit at all reasonable times by El Paso, its designee or an applicable governmental agency having jurisdiction over the Funds.

Within thirty (30) business days after the end of each calendar month and within thirty (30) business days after the close of each annual accounting period of each Fund, and as soon as reasonably practicable after the resignation or removal of a Decommissioning Trustee has become effective, Decommissioning Trustee shall furnish to El Paso a written account setting forth all (A) investments, receipts, disbursements, and other transactions effected by it during such month or year, as applicable, or during the part of the month or year to the date any such resignation or removal is effective, as applicable, and containing a description of all assets, including but not limited to all securities, purchased and sold (the description of the securities purchased must state the price at which each individual security was purchased), the cost or net proceeds of sale, and the securities and investments held at the end of such period, (B) the gains or losses realized by each Fund upon sales or other disposition of its assets, (C) the increase or decrease in the value of each Fund, (D) the fair market values of each Fund, and (E) the liabilities (excluding liability for Decommissioning) of the Funds incurred or unpaid at the end of such period. Within three (3) business days after the end of each calendar month and within three (3) business days after the close of each annual accounting period of each Fund, and as soon as reasonably practicable after the resignation or removal of a Decommissioning Trustee 17

has become effective, Decommissioning Trustee shall also provide El Paso secured web-based access to the information described in clauses (A) - (E) of this Section 17. The accounting shall also furnish El Paso such other information as Decommissioning Trustee may possess and as may be necessary for El Paso, Decommissioning Trustee and/or a Fiduciary Investment Manager to comply with any reporting requirements applicable to any of such parties and/or the Funds. If the fair market value of an asset in a Fund is not available, when necessary for accounting or reporting purposes the fair market value of the asset shall be determined in good faith by Decommissioning Trustee, assuming an orderly liquidation at the time of such determination. In addition, upon the written request of El Paso, which may be at any time and from time to time, Decommissioning Trustee shall provide El Paso the fair market value of the assets in a Fund as of a date other than the last day of a month or an annual accounting period of a Fund. If there is a disagreement between the Decommissioning Trustee, a Fiduciary Investment Manager and/or any other party as to any act or transaction reported in an accounting, Decommissioning Trustee or the Fiduciary Investment Manager, as applicable, shall have the right to have such disagreement settled by a court of competent jurisdiction. Decommissioning Trustee shall make such other reports as may be agreed upon in writing with El Paso.

Decommissioning Trustee shall retain its records and accountings related to the Funds as long as necessary for the proper administration thereof and at least for any period required by any applicable law, but with respect to each record and account for not less than six (6) years following the creation thereof.

El Paso shall have the right to cause the books, records, and accounts of Decommissioning Trustee that relate to the Funds to be examined and audited by independent auditors designated by El Paso at such times as El Paso may determine, and Decommissioning Trustee shall make such books, records, and accounts available for such purposes at all reasonable times.

El Paso shall, with the cooperation of Decommissioning Trustee, prepare or, upon agreement of Decommissioning Trustee, authorize Decommissioning Trustee to prepare, such tax returns and other reports for or with respect to each Fund as may be required from time to time by Applicable Law.

SECTION 18. Rights of Decommissioning Trustee.

(A) Decommissioning Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Agreement or required by the Texas Trust Code, and no implied duties or obligations shall be read into this Agreement against Decommissioning Trustee except such as are required by the Texas Trust Code.

(B) Decommissioning Trustee shall not have any obligation to invest, manage, control, make any payment from, or otherwise deal with, the Funds except as expressly provided herein or in written guidelines or instructions received pursuant to the terms hereof (C) Decommissioning Trustee may rely and shall be protected in acting upon any certificate, statement, notice, or other writing believed by it to be genuine and to have been signed or presented by the proper party or parties, and unless it has actual knowledge to the contrary, Decommissioning Trustee shall not be bound to make any investigation into the facts or matters stated in any certificate, statement, notice, or other writing received by it.

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(D) In the administration of the Funds hereunder, Decommissioning Trustee may execute any of the trusts or powers hereof and perform its powers and duties hereunder directly or through agents or attorneys and may consult with counsel, accountants and other skilled persons to be selected and employed by it, and Decommissioning Trustee shall not be liable for anything done or omitted by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons to the extent permitted by law and to the extent no such action or omission constitutes negligence or willful misconduct by Decommissioning Trustee.

(E) With respect to any obligation of El Paso hereunder to indemnify Decommissioning Trustee, Decommissioning Trustee shall look solely to El Paso and shall not have any lien upon the assets of the Funds to secure such obligation.

SECTION 19. Notices.

(A) Except as otherwise provided in this Agreement, all notices under this Agreement shall be in writing and be effective upon receipt if delivered by (1) hand, (2) certified or registered United States Mail postage prepaid, or (3) facsimile, provided that service by facsimile after 5:00 p.m. local time of the recipient shall be deemed delivered on the following business day, as follows:

If notice is to the Trustee:

Bank of America Attention: El Paso Electric Company Relationship Manager 303 West Wall PO. Box 270 Midland, TX 79702-0270 If notice is to the Grantor:

El Paso Electric Company Attention: Controller 123 W. Mills Avenue El Paso, Texas 79901 Facsimile (915) 521-4772 and, if the notice is sent for the purposes described in Sections 5, 14(A), 14(B), and 19(B), with a copy to:

El Paso Electric Company Office of the General Counsel 123 W. Mills Avenue El Paso, Texas 79901 Facsimile (915) 521-4747 (B) Each person may change its address for purposes of notice under this Agreement 19

by notice complying with Section 20(A).

Any notice required under this Agreement may be waived in writing by the party entitled thereto.

SECTION 20. Counterpart Execution. This Agreement may be executed in any number of counterparts and by each of the parties hereto on separate counterparts; all such counterparts shall together constitute but one and the same instrument.

SECTION 21. Effective Date. This Agreement shall become effective on the "Effective Date" as defined herein.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed as of the day and year above written.

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EL PASO:

EL PASO ELECTRIC COMPANY DECOMMISSIONING TRUSTEE:

BANK OF AMERICA, N.A., a national banking association By: z le 7 e4 Tit ice President STATE OF TEXAS I ss.

COUNTY OF EL PASO 9A The foregoing instrument was acknowledged befor this Ig day of RC Cy aT c ti bel of said c oat of EL PASO ELECTRIC COMPANY, a Texas corporation, on behalf of said corporation.

,/)o1 A'0, -,- i m Notary Public My co ission expires:

/asf 5s, o? &7 21

STATE OF TEXAS §

§ ss.

COUNTY OF203 b MIDLAND~eebr §onR eesn ,Vc rsdn The foregoing instrument was acknowledged before me this 19th day of December, 2003 by John R. Peterson ,9Vice President of BANK OF AMERICA, N.A., a national banking association, on behalf of said association.

Notary Public My commission expires:

02 O' i CY

,.~Q:Ale, GH (USLIC l i .'*f;-OFTEXAS

/ MITm. Exp. 02-07-04 22

Appendix A to Decommissioning Trust Agreement for Palo Verde Nuclear Generating Station Unit 2 DEFINITION OF TERMS ANPP Participation Agreement shall mean the Arizona Nuclear Power Project Participation Agreement, dated as of August 23, 1973, as amended, among Arizona Public Service Company, Salt River Project Agricultural Improvement and Power District, Southern California Edison Company, Public Service Company of New Mexico, Southern California Public Power Authority, Department of Water and Power of The City of Los Angeles, and El Paso.

Applicable Law shall mean all applicable laws, statutes, treaties, rules, codes, ordinances, regulations, permits, certificates, orders, interpretations, licenses, and permits of any federal, state, county, municipal, foreign, international, regional, or other governmental authority, agency, board, body, instrumentality, or court, and judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator, or other judicial or quasi-judicial tribunal (including those pertaining to health, safety, the environment, or otherwise).

Applicable Tax Law shall mean Code Section 468A, any comparable subsequent provisions of the Code, the United States Treasury regulations promulgated under such section or provisions, and other provisions of the Code relating to the federal taxation of the Funds.

Code shall mean the Internal Revenue Code of 1986, as amended, or any successor law.

Decommissioning shall mean the decommissioning and retirement from service of Unit 2, and the related possession, maintenance, and disposal of material, radioactive or otherwise used in or produced by or relating to Unit 2, including, without limitation: (i) placement and maintenance in a state of protective storage; (ii) in-place entombment and maintenance; (iii) dismantlement; (iv) removal, decontamination and disposition of equipment and fixtures; (v) razing; (vi) removal and disposition of debris related to Unit 2 from the PVNGS Site; (vii) restoration of the PVNGS Site related to Unit 2 for unrestricted use; (viii) any other actions relating to decommissioning and retirement from service of Unit 2 required by the NRC; and (ix) all activities undertaken incident to the implementation thereof.

Decommissioning Cost shall mean El Paso's pro-rata share, under the ANPP Participation Agreement, of the greater of (i) the latest estimate of Termination Costs (as that term is defined by the ANPP Participation Agreement) for Unit 2 or (ii) the minimum amount required by the NRC to be funded for the decommissioning of Unit 2.

Deemed Distribution Amount shall mean an amount in the Decommissioning Trust Fund that is treated by Applicable Tax Law as having been distributed by reason of the disqualification of all or a part of such Fund.

Excess Contribution shall mean the amount by which cash payments made (or deemed made) by El Paso into the Decommissioning Trust Fund during any taxable year of El Paso exceeds the payment limitation imposed by Applicable Tax Law.

Expenses shall mean: (a) in the case of the Decommissioning Trust Fund, (i) the tax imposed by Code Section 468A(e)(2); (ii) any state or local tax imposed on the income or the assets of such Fund; and (iii) legal, accounting, and actuarial fees and expenses, trustee's fees and expenses, and all other ordinary administrative costs and incidental expenses, incurred by Decommissioning Trustee, a Fiduciary Investment Manager, or El Paso in connection with the operation of such Fund, but in each case only to the extent permitted by Code Section 468A(e)(4)(B) or other Applicable Tax Law to be paid from the assets of a "Nuclear Decommissioning Reserve Fund," as that term is used in Applicable Tax Law; and (b) in the case of the Second Fund, (i) any federal, state, or local tax actually paid by El Paso with respect to the income or the assets of such Fund including a payment to El Paso of the federal income tax (at the statutory rate) with respect to the taxable income of such Fund required to be included on El Paso's federal income tax return; and (ii) legal, accounting and actuarial expenses, trustee's fees and expenses, and all other ordinary administrative costs and incidental expenses, incurred by Decommissioning Trustee, a Fiduciary Investment Manager, or El Paso in connection with the operation of such Fund; provided, however, Expenses shall not include taxes on or with respect to fees paid to Decommissioning Trustee or a Fiduciary Investment Manager and taxes that Code Section 4951 requires be paid by Decommissioning Trustee.

Fiduciary Investment Manager shall mean any institution or professional appointed by El Paso, other than Decommissioning Trustee, who is responsible for the investment and reinvestment of the Funds.

License shall mean NRC Facility Operating License No. NPF-41, issued December 31, 1984, as the same miy be amended, modified, extended, renewed or superseded from time to time.

NRC shall mean the Nuclear Regulatory Commission of the United States of America or any successor agency.

PVNGS shall mean the Palo Verde Nuclear Generating Station, which is located on the PVNGS Site.

PVNGS Site shall mean the real property located in Maricopa County, Arizona, approximately 36 miles west of the City of Phoenix, Arizona and approximately 16 miles west of the City of Buckeye, Arizona, which legal description is contained in Appendix B to the ANPP Participation Agreement.

Qualified Investments shall mean investments that meet the intent, standards, liabilities, and general and specific requirements and conditions on investments as set forth in Section 7 herein.

Unit 2 shall mean the 1,270 megawatt unit, commonly known as Unit 2, at PVNGS.

DECOMMISSIONING TRUST AGREEME Dated as of December 18, 2003 t between EL PASO ELECTRIC COMPANY and BANK OF AMERICA, NA.

As Decommissioning Trustee for Palo Verde Unit 3

DECOMMISSIONING TRUST AGREEMENT FOR PALO VERDE NUCLEAR GENERATING STATION UNIT 3 This Decommissioning Trust Agreement (the "Agreement"), to be effective as of December 24, 2003 (the "Effective Date"), between Bank of America, N.A., a national banking association ("Decommissioning Trustee") and El Paso Electric Company, a Texas corporation

("El Paso").

The Nuclear Regulatory Commission ("NRC"), an agency of the United States of America, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974, has promulgated regulations codified in Title 10, Chapter I of the Code of Federal Regulations, Part 50, as amended. These regulations, applicable to El Paso, require that each holder of a license issued pursuant thereto must provide assurance that funds will be available for Decommissioning.

El Paso and others entered into the Arizona Nuclear Power Project Participation Agreement executed as of August 23, 1973 (the "ANPP Participation Agreement").

Amendment 13 to the ANPP Participation Agreement, effective June 15, 1991, requires El Paso to establish and maintain funds for the accumulation, over a period not in excess of the remaining term of the operating license for Unit 3 and the period thereafter until completion of Decommissioning, of funds sufficient to pay Decommissioning Cost.

In addition, El Paso is required by the Public Utility Commission of Texas ("PUCT"),

the New Mexico Public Regulation Commission ("NMPRC"), the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission to establish a source of funds to pay for Decommissioning.

Under Applicable Tax Law, certain federal income tax benefits are available to El Paso from establishing and making contributions to a "Nuclear Decommissioning Reserve Fund" for Unit 3. In order to satisfy its obligations under the ANPP Participation Agreement, to comply with the requirements of the governmental authorities referred to above, and to obtain such federal income tax benefits, on April 1, 1986, El Paso entered into a Decommissioning Trust Agreement, which was amended by Amendment No. 1 dated September 1, 1991 (the "Original Agreement"), creating two decommissioning trust funds to provide external funds for Decommissioning, for purposes of this Agreement designated as the Decommissioning Trust Fund and the Second Fund. The Decommissioning Trust Fund is intended at all times to qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law.

On January 9, 1996, in Cause No. 92-10148-FM, styled In re: El Paso Electric Company, the United States Bankruptcy Court for the Western District of Texas (Austin Division) entered an order confirming the Fourth Amended Plan of Reorganization of El Paso (the "Plan"). In accordance with the Plan, which became effective on February 12, 1996, El Paso and Decommissioning Trustee restated and amended the Original Agreement to ensure that the Decommissioning Trust Fund and the Second Fund would continue to be held, managed and distributed, without interruption, in accordance with the terms of the Original Agreement, Applicable Law, and Applicable Tax Law.

2

This Agreement, in turn, amends and restates the Original Agreement, as restated and amended effective February 12, 1996, to read in its entirety as follows and continues the Decommissioning Trust Fund and the Second Fund.

Therefore, in consideration of the foregoing premises, the acceptance by Decommissioning Trustee of the trusts created, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto restate and amend the Original Agreement, as restated and amended effective February 12, 1996, as follows:

SECTION 1. Definitions; References to Sections. All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings set forth in Appendix A hereto. Unless otherwise stated, references to a "Section" are to a section of this Agreement.

SECTION 2. Creation of Trust Funds. El Paso has established and hereby confirms the establishment with Decommissioning Trustee of the Decommissioning Trust Fund and the Second Fund (each a "Fund" and together the "Funds"). Each Fund shall include: (A) all cash and investments thereof, as more specifically described in Section 7; (B) all dividends, interest, cash, instruments, and other property from time to time received, receivable, or otherwise distributed or distributable in respect of or in exchange for any or all such investments; (C) all rights and privileges with respect to such investments; and (D) all proceeds of any of the foregoing and any property of any character whatsoever into which any of the foregoing may be converted.

SECTION 3. Purpose of Trust Funds; Tax Qualification. The Funds are for the accumulation and funding of amounts to pay costs, liabilities, and expenses of Decommissioning, including the accumulation, over a period not in excess of the remaining term of the operating license for Unit 3 and the period thereafter until completion of Decommissioning, of amounts which are sufficient to pay Decommissioning Cost. The Decommissioning Trust Fund, but not the Second Fund, is intended at all times to qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law. El Paso and the applicable Fiduciary Investment Manager(s), if any, and Decommissioning Trustee (but with respect to Decommissioning Trustee only as to those assets of the Funds that are not under the direction of a Fiduciary Investment Manager) shall seek to obtain the best possible tax treatment of amounts collected for nuclear plant decommissioning; and in this regard, El Paso and the applicable Fiduciary Investment Manager(s), if any, and Decommissioning Trustee (but with respect to Decommissioning Trustee only as to those assets of the Funds that are not under the direction of a Fiduciary Investment Manager) shall take maximum advantage of tax deductions and credits when it is consistent with sound business practices to do so. The assets of the Decommissioning Trust Fund must be used as authorized by section 468A of the Code and shall be used exclusively:

(A) subject to the limitations and conditions of Section 9, to satisfy, in whole or in part, El Paso's obligation to pay for Decommissioning; (B) subject to the limitations and conditions of Section 8, to pay Expenses; and (C) to the extent not currently required for the uses described in (A) and (B) above, and subject to the limitations and conditions of Section 7, for investment in Qualified Investments.

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The Funds shall be used exclusively for Decommissioning of Unit 3. This Agreement may not be amended so as to violate section 468A of the Code or the regulations there under.

SECTION 4. Declaration and Acceptance of Trust. Decommissioning Trustee accepts the trusts created hereby and declares that it will hold and administer all estate, right, title, and interest in and to each Fund upon the trusts set forth herein, but only on the terms of this Agreement, and agrees to receive and disburse all moneys and investments constituting any part of each Fund in accordance with this Agreement. No implied duties or obligations shall be read into this Agreement against Decommissioning Trustee. Decommissioning Trustee shall not commit any act, enter into any transaction, or permit any act or transaction to occur that is an "act of self dealing" between the Decommissioning Trust Fund and "a disqualified person" as those terms are defined by Applicable Tax Law, and, if such an act occurs, Decommissioning Trustee shall promptly take all necessary steps to correct it as soon as it has knowledge of the occurrence.

SECTION 5. Ownership of Funds. Not in limitation of its fiduciary duty hereunder, title to any and all property held in each Fund shall be held by Decommissioning Trustee in its name as trustee as owner of record. At all times, Decommissioning Trustee shall follow the directives of (A) the applicable Fiduciary Investment Manager, if any, with respect to exercising any and all corresponding voting, consensual, and other rights accruing to the owner of such property in connection with such property, and, except as provided in this subsection 5.(A), (B)

El Paso with respect to exercising any and all such voting, consensual, and other rights.

Decommissioning Trustee shall have the right, in its name, as trustee upon prior written notice to El Paso, to settle, compromise, prosecute, or defend any action, claim, or proceeding with respect to any and all property held in each Fund. Subject to the provisions of this Agreement, Decommissioning Trustee may sell, assign, endorse, pledge, transfer, and make any agreement respecting, or otherwise deal with, any and all property held in each Fund; provided, however, that except as required by Section 7, nothing herein contained shall be construed as requiring or obligating Decommissioning Trustee to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim or notice, or to take any action with respect to any of the property held in each Fund. It is not the duty of Decommissioning Trustee or a Fiduciary Investment Manager to ensure that the Funds are adequate to pay for Decommissioning.

SECTION 6. Payments into the Funds. From time to time, but not less than yearly, El Paso shall pay amounts into one or both of the Funds. El Paso may deposit all or any part of any payment entirely into the Decommissioning Trust Fund, entirely into the Second Fund, or partly into each in whatever proportion El Paso shall determine in its discretion; except that, if a deduction is allowed under Applicable Tax Law for payments into the Decommissioning Trust Fund, El Paso shall not make, and Decommissioning Trustee shall not accept, any payment into such Fund unless such payment (a) is in cash, to the extent Applicable Tax Law requires the payment to be in cash, and (b) complies with the amount limitation imposed by Applicable Tax Law and a deduction pursuant to Applicable Tax Law is allowed for the entire payment.

Decommissioning Trustee may accept from El Paso, as proof that these conditions are satisfied, a certificate executed by El Paso as to compliance with the amount limitation and deductibility of such payment, and, unless Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee may rely on such certificate without further inquiry or verification.

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SECTION 7. Investment of Funds.

(A) Decommissioning Trustee. Any amounts held by Decommissioning Trustee in each Fund shall be invested and reinvested by it from time to time, but only in Qualified Investments; provided, however, if El Paso has delivered to Decommissioning Trustee a copy of an order of a state or federal regulatory agency that El Paso certifies is binding on El Paso and limits the investments in which all or a part of either Fund may be invested, the investment of such Fund shall not violate such order. A Fiduciary Investment Manager appointed by El Paso may direct investments and reinvestments of the Funds by written direction which shall certify that the directed investment qualifies as an investment in Qualified Investments and is within the limitation set forth in the preceding sentence. Decommissioning Trustee may rely upon such direction and certification without further inquiry or verification unless Decommissioning Trustee has actual knowledge that the directed investment does not satisfy the conditions and limitations of this Section 7.

In performing its duties and exercising its powers as Decommissioning Trustee hereunder, and in performing any investment management functions hereunder, Decommissioning Trustee shall comply with the following:

(i) it shall add all income, including interest, earned on the corpus of each Fund to such corpus as a part thereof, and shall owe the same duties with regard to such income as it owes with regard to such corpus; (ii) it shall have the continuing duty to review the assets of each Fund to determine the appropriateness of the investments consistent with all terms, provisions and limitations of this Agreement, including without limitation to ensure compliance with the provisions of the investment guidelines of this Section 7, any order of a state or regulatory agency limiting investments that El Paso has delivered and certified to Decommissioning Trustee as provided above, and any other applicable governing regulations; (iii) it shall not lend all or any part of either Fund to itself or to any of its officers or directors or permit any act of "self-dealing" prohibited by Applicable Tax Law; (iv) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, itself or any of its officers or directors, except that, if El Paso directs it to do so in writing, it may invest or reinvest amounts in the Funds in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, and except that, if El Paso directs it to do so in writing, it may invest amounts in the Funds in mutual funds that contain securities issued by Decommissioning Trustee provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; (v) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, El Paso, its subsidiaries or affiliates or their successors or assigns, except that, if El Paso approves in writing, it may invest or reinvest amounts in the Funds in mutual funds that contain securities issued by El Paso provided such 5

securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; and (vi) Notwithstanding anything to the contrary in this Agreement, if directed by El Paso, Decommissioning Trustee shall hold and maintain one or both of the Funds in a segregated account and invest and administer such Fund(s) separately from the assets of Decommissioning Trustee or other trusts.

(B) Fiduciar Investment Manager. Any amount of each Fund directed to be invested by a Fiduciary Investment Manager shall be invested and reinvested by Decommissioning Trustee as directed by such Fiduciary Investment Manager from time to time, but only in Qualified Investments; provided, however, if El Paso has delivered to a Fiduciary Investment Manager a copy of an order of a state or federal regulatory agency that El Paso certifies is binding on El Paso and limits the investments in which all or a part of a Fund may be invested, the investment of such Fund shall not violate such order. A Fiduciary Investment Manager appointed by El Paso may direct investments and reinvestments of the Funds by written direction which shall certify that the directed investment qualifies as an investment in Qualified Investments and is within the limitation set forth in the preceding sentence. Decommissioning Trustee may rely upon such written direction and certification without further inquiry or verification unless Decommissioning Trustee has actual knowledge that the directed investment does not satisfy the conditions and limitations of this Section 7.

In performing its duties and exercising its powers as a Fiduciary Investment Manager hereunder, a Fiduciary Investment Manager shall comply with the following:

(i) it shall direct the addition of all income, including interest, earned on the corpus of each Fund subject to its direction to such corpus as a part thereof, and shall owe the same duties with regard to such income as it owes with regard to such corpus; (ii) it shall have a continuing duty to review the assets of each Fund subject to its direction to determine the appropriateness of the investments consistent with all terms, provisions and limitations of this Agreement, including without limitation to ensure compliance with the provisions of the investment guidelines of this Section 7, any order of a state or regulatory agency limiting investments that El Paso has delivered to such Fiduciary Investment Manager as hereinabove provided and any other applicable governing regulations; (iii) it shall not direct the lending of all or any part of either Fund to itself or to any of its officers or directors or permit any act of "self-dealing" prohibited by Applicable Tax Law; (iv) it shall not direct the investment or reinvestment of amounts in either Fund with, or in any instrument or security issued by, itself or any of its officers or directors; (v) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, Decommissioning Trustee or any of Decommissioning Trustee's officers or directors, except that, if El Paso directs it to do so in writing, it may invest or reinvest amounts in the Funds in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, and except that, if El Paso directs it to do 6

so in writing, it may invest amounts in the Funds in mutual funds that contain securities issued by Decommissioning Trustee provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; (vi) it shall not direct the investment or reinvestment of amounts in either Fund with, or in any instrument or security issued by El Paso, its subsidiaries or affiliates or associates or their successors or assigns of El Paso, except that, if El Paso approves in writing, it may direct the investment or reinvestment of amounts in the Funds in mutual funds that contain securities issued by El Paso provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; and (vii) it shall provide Decommissioning Trustee directives concerning voting, consensual, and other rights and powers accruing in connection with assets of the Funds subject to such Fiduciary Investment Manager's direction.

(C) General. It is the intent of El Paso that neither Decommissioning Trustee nor a Fiduciary Investment Manager shall have any powers that are greater than those provided to trustees under the Texas Trust Code or that are inconsistent with the limitations that are set out in this Section 7.

(D) Investments Standards. To the extent not inconsistent with the other provisions of this Section 7 and to the extent that Decommissioning Trustee does not currently require the assets of the Funds for the purpose of satisfying the liability of El Paso for Decommissioning and to pay Expenses:

(i) Decommissioning Trustee shall, in connection with investing and reinvesting assets of the Funds, exercise the same standard of care that a reasonable person would exercise in the same circumstances; provided, however, that this subsection 7.(D)(i) shall apply only as to those assets of the Funds that are not subject to the direction of a Fiduciary Investment Manager; and (ii) a Fiduciary Investment Manager appointed to direct the investment and reinvestment of all or any portion of the assets of the Funds shall, with respect to such assets subject to its direction, exercise the same degree of care that a reasonable person would exercise in the same circumstances.

For purposes of this subsection entitled "Investment Standards", a "reasonable person" means a prudent investor as described in Chapter 117, Uniform Prudent Investor Act, of the Texas Property Code.

(E) Qualified Investments. Qualified Investments include those investments meeting the investment standards, limitations, conditions, and requirements prescribed in the foregoing subsections of this Section 7 and the following criteria which may be amended by El Paso upon written notice to Decommissioning Trustee and each Fiduciary Investment Manager.

(i) Investment Portfolio Goals. The Funds shall be invested consistent with the goals set forth in this subsection 7.(E)(i).

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(a) Assets of the Decommissioning Trust Fund shall be invested only as permitted for a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law.

(b) Assets of the Funds shall be invested with a goal of earning a reasonable return commensurate with the need to preserve the value of the assets of the Funds.

(c) In keeping with prudent investment practices, the portfolio of securities held in the Funds shall be diversified to the extent reasonably feasible given the size of the Funds.

(d) Asset allocation and the acceptable risk level of the assets of the Funds should take into account market conditions, the time horizon remaining before the commencement and completion of Decommissioning, and the funding status of the Funds. While maintaining an acceptable risk level consistent with the goal referenced in subsection 7.(E)(i)(b) of this Section 7, the investment emphasis when the remaining life of the liability, as defined in subsection 7.(E)(ii)(d)(4) of this subsection, exceeds five years should be to maximize net long-term earnings. The investment emphasis in the remaining investment period of the Funds should be on current income and the preservation of each Fund's assets.

(e) In selecting investments, the impact of the investment on the volatility and expected return of the. assets of the Funds, net of fees, commnissions, expenses, and taxes should be considered.

(ii) General Requirements. The restrictions contained in this subsection 7.(E)(ii)apply to the Decommissioning Trust Fund and Second Fund in the aggregate.

For purposes of this subsection 7.(E)(ii), a commingled funds is defined as a professionally managed investment fund of fixed-income or equity securities established by an investment company regulated by the Securities Exchange Commission or a bank regulated by the Office of the Comptroller of the Currency.

(a) Diversification. For the purpose of this subsection 7.(E)(ii)(a), a commingled or mutual fund is not considered a security; rather, the diversification standard applies to all securities, including the individual securities held in commingled or mutual funds. Once the portfolio of securities (including those held in commingled or mutual funds) held in the Funds contains securities with an aggregate value in excess of $20 million, it shall be diversified such that:

(1) no more than five percent (5%) of the securities held may be issued by one entity, with the exception of the federal government, its agencies and instrumentalities; and 8

(2) the portfolio shall contain at least 20 different issues of securities, and municipal securities and real estate investments shall be diversified as to geographic region.

(b) Derivatives. The use of derivative securities in the Funds is limited to those whose purpose is to enhance returns of the Funds without a corresponding increase in risk or to reduce risk of the assets of the Funds. Derivatives may not be used to increase the value of the assets of the Funds by any amount greater than the value of the underlying securities. Prohibited derivative securities include, but are not limited to, mortgage strips; inverse floating rate securities; leveraged investments or internally leveraged securities; residual and support tranches of collateralized mortgage obligations; tiered index bonds or other structured notes whose return characteristics are tied to non-market events; uncovered call/put options; large counter-party risk through over-the-counter options, forwards and swaps; and instruments with similar high-risk characteristics.

(c) Leverage. The use of leverage (borrowing) to purchase securities or the purchase of securities on margin for a Fund is prohibited.

(d) Investment limits in equity securities. The following investment limits shall apply to the percentage of the aggregate market value of all non-fixed income investments relative to the total portfolio market value:

(1) except as noted in subsection 7.(E)(2)(b), when the weighted average remaining life of the liability exceeds 5 years, the equity cap shall be sixty percent (60%);

(2) when the weighted average remaining life of the liability ranges between 5 years and 2.5 years, the equity cap shall be thirty percent (30%). Additionally, during all years in which expenditures for Decommissioning occur, the equity cap shall also be thirty percent (30%);

(3) when the weighted average remaining life of the liability is less than 2.5 years, the equity cap shall be zero percent (O0/%);

(4) for purposes of this subsection 7.(E)(ii)(4), the weighted average remaining life in any given year is defined as the weighted average of years between the given year and the years of each Decommissioning outlay, where the weights are based on each year's expected Decommissioning expenditures divided by the amount of the remaining liability in that year; and 9

(5) should the market value of non-fixed income investments, measured monthly, exceed the appropriate cap due to market fluctuations, the market value of the non-fixed income investments shall be reduced below the cap as soon as practicable. Such reductions may be accomplished by investing all future contributions to a Fund in debt securities as is necessary to reduce the market value of the non-fixed income investments below the cap, or if prudent, by the sale of equity securities.

(iii) Specific Investment Restrictions. The restrictions contained in this subsection 7.(E)(iii). apply to the Decommissioning Trust Fund and the Second Fund in the aggregate.

(a) Fixed-income investments. Assets of the Funds shall not be invested in corporate or municipal debt securities that have a bond rating below investment grade "BBB-" by Standard & Poor's Corporation or "Baa3" by Moody's Investor's Service) at the time that the securities are purchased. If the debt rating of a company or municipality issuing the particular debt security falls below investment grade at some time after the security was purchased, the appropriateness of continuing to hold such security shall be reexamined. The overall portfolio of debt instruments shall have a quality level, measured quarterly not below an "AA" grade by Standard & Poor's Corporation or "Aa2" by Moody's Investor's Service. In calculating the quality of the overall portfolio, debt securities issued by the federal government shall be considered as having an "AAA" rating.

(b) Equity Investments.

(1) At least seventy percent (70%) of the aggregate market value of the equity assets of the Funds, including the individual securities in commingled funds, shall have a quality ranking from a major rating service such as the earnings and dividend ranking for common stock by Standard and Poor's or the quality rating of Ford Investor Services. Further, the overall portfolio of ranked equities shall have a weighted average quality rating equivalent to the composite rating of the Standard and Poor's 500 Index assuming equal weighting of each ranked security in the Index. If the quality rating, measured quarterly, falls below the minimum quality standard, the quality level of the equity assets of the Funds shall be increased to the required level as soon as is practicable and prudent: and (2) assets of the Funds shall not be invested in equity securities if the issuer has a capitalization of less than $100 million.

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(c) Commingled funds. The following guidelines shall apply to the investments made through commingled funds. Examples of commingled funds appropriate for investment by nuclear decommissioning trust funds include United States equity-indexed funds, actively managed United States equity funds, balanced funds, bond funds, real estate investment trusts, and international funds.

(1) The commingled funds should be selected consistent with the investment goals specified in subsection 7.(E)(i) and the general requirements in subsection 7.(E)(ii);

(2) in evaluating the appropriateness of a particular commingled fund, the following duties shall be of a continuing nature:

(I) a duty to determine whether the fund manager's fee schedule for managing the fund is reasonable, when compared to fee schedules of other such managers; (II) a duty to investigate and determine whether the past performance of the investment manager in managing the commingled fund has been reasonable relative to prudent investment and utility decommissioning trust practices and standards; and (III) a duty to investigate the reasonableness of the net after-tax return and risk of the commingled fund relative to similar funds, and the appropriateness of the commingled fund within all of the assets of the Funds; (3) the payment of load fees shall be avoided; and (4) commingled funds focused on specific market sectors or concentrated in a few holdings shall be used only as necessary to balance the Funds' overall investment portfolio mix.

Notwithstanding any other provision of this Section 7, nothing in this Section 7 shall be construed to permit any investment otherwise prohibited by any other provision of this Agreement, Applicable Law, or Applicable Tax Law. This Agreement and the investments of the Funds shall be interpreted and construed in a manner consistent with the parties' intention that this Agreement and the Funds at all times comply with all requirements of the Nuclear Regulatory Commission and other applicable governmental regulations and rules, including without limitation the rules of the PUCT, the NMPRC, and the Federal Energy Regulatory Commission, including but not limited to the "Final Rule" regarding the formation, organization and purposes of nuclear plant decommissioning trust funds and for fund investments issued June 16, 1995, as may be amended from time to time.

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SECTION 8. Expenses; Indemnification. El Paso shall pay all Expenses and, subject to Section 9.(D), may direct Decommissioning Trustee, in writing, to pay specified Expenses of a Fund from such Fund. El Paso shall certify in writing to Decommissioning Trustee whether and the extent to which an item is an Expense of a specified Fund and whether Applicable Tax Law permits its payment out of the assets of the Fund; and Decommissioning Trustee may, unless it has actual knowledge to the contrary, rely upon such certification without further inquiry or verification.

Except to the extent Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee shall be fully protected in relying upon the existence of any fact or state of facts represented to it in writing by El Paso or a duly appointed Fiduciary Investment Manager.

Except with respect to liability or fiduciary responsibility for any error or loss that may result by reason of the exercise or non-exercise of the duties, obligations, and/or fiduciary responsibility which are allocated to Decommissioning Trustee herein which is determined to be the result of Decommissioning Trustee's own negligence or willful misconduct, El Paso shall indemnify Decommissioning Trustee, directly from El Paso's own assets (including the proceeds of any insurance policy the premiums of which are paid from El Paso's own assets), from and against any and all claims, demands, losses, damages, expenses (including, by way of illustration and not limitation, reasonable attorneys' fees and other legal and litigation costs), judgments, and liabilities arising from, out of, or in connection with the administration or investment of the Funds. Decommissioning Trustee shall not be liable for any action taken by Decommissioning Trustee or any failure to act by Decommissioning Trustee if the action taken or the failure to act was directed by El Paso or a Fiduciary Investment Manager, if Decommissioning Trustee reasonably relied on such direction. This Section 8 shall survive the termination of this Agreement.

SECTION 9. Payments and Distributions from the Funds.

(A) Subject to the other provisions of this Section 9, Decommissioning Trustee shall make payments out of the Funds upon presentation by El Paso of (A) a certificate signed by El Paso (i) instructing Decommissioning Trustee to disburse amounts in the Funds in a manner designated in such certificate for purposes of paying for Decommissioning and (ii) certifying that disbursements, if any, directed to be made from assets of the Decommissioning Trust Fund are for payment of only those costs, liabilities, and expenses of Decommissioning that qualify as "nuclear decommissioning costs" under Applicable Tax law, and (B) documentation reasonably acceptable to Decommissioning Trustee that such payment for Decommissioning is due and payable.

(B) Upon termination of the Decommissioning Trust Fund under Applicable Tax Law, El Paso may direct Decommissioning Trustee to transfer all property remaining in the Decommissioning Trust Fund to El Paso for disbursement or distribution as may then be provided by law. In addition, upon its receipt of a certificate signed by El Paso certifying that Decommissioning has been completed under Applicable Law and all costs of Decommissioning have been paid in full, all property then held in both Funds shall be paid by Decommissioning Trustee to El Paso for disbursement or distribution as may then be provided by law and the Funds shall terminate.

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(C) At any time and from time to time El Paso may direct Decommissioning Trustee in writing to, and upon receipt of such direction Decommissioning Trustee shall, subject to the applicable provisions of Section 9.(D), distribute to El Paso for disbursement or distribution as then may be provided or permitted by law or transfer from the Decommissioning Trust Fund to the Second Fund any:

(i) Deemed Distribution Amount that El Paso certifies in writing is deemed distributed under Applicable Tax Law; (ii) Excess Contribution that El Paso certifies in writing (a) has occurred under Applicable Tax Law, and (b) is being transferred within the time permitted for withdrawal or transfer of such Excess Contribution by Applicable Tax Law; and (iii) amount that El Paso certifies in writing may be transferred to the Second Fund in accordance with Applicable Law and Applicable Tax Law by reason of the disposition of all or a part of El Paso's interest in or license to possess Unit 3.

(D) Notwithstanding any other provision in this Agreement, except for (i) payments made under Section 8 for Expenses, (ii) to the extent allowed by Applicable Law, Deemed Distribution Amounts and Excess Contributions transferred to the Second Fund or distributed to El Paso under Section 9.(C), and (iii) withdrawals made pursuant to 10 C.F.R. 50.82(a)(8) no disbursement or payment from the Funds shall be made unless (a) thirty (30) business days prior written notice of the intention to make such disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, and the Director, Office of Nuclear Material Safety and Safeguards, and (b) Decommissioning Trustee has not received written notice of an objection during such thirty (30) day period from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards,. The notices required by this Secti6n 9.(D) may be made by or on behalf of Decommissioning Trustee.

(E) Unless Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee shall be fully protected in relying upon any certificate described in Section 9 without further inquiry or verification.

SECTION 10. Further Assurances. El Paso agrees that it will, at its sole expense, do all such further acts and things and execute and deliver all such additional conveyances, assignments, agreements, and instruments, as may be necessary or desirable or as Decommissioning Trustee may at any time reasonably request in connection with the administration and enforcement of this Agreement, or relative to the Funds or any part thereof, or in order to assure and confirm unto Decommissioning Trustee its rights, powers, and remedies hereunder.

El Paso may provide general investment policies in writing to Decommissioning Trustee or a Fiduciary Investment Manager, but may not engage in the day-to-day management of the Funds or mandate, or itself make, individual investment decisions except to the extent that El Paso retains the right under this Agreement to approve investments in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, in mutual funds that contain securities issued by Decommissioning Trustee (subject to the limitations elsewhere herein set forth), or in mutual funds that contain securities issued by El Paso, its subsidiaries or affiliates or their successors or assigns (subject to the limitations elsewhere herein set forth).

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El Paso will regularly supply to Decommissioning Trustee and to each Fiduciary Investment Manager, and regularly update, essential information about Unit 3 including its description, useful life, the Decommissioning plan that El Paso intends to follow, El Paso's anticipated liquidity needs once Decommissioning begins, and any other information that Decommissioning Trustee and a Fiduciary Investment Manager need to construct and maintain, over time, a sound investment plan for the Funds.

SECTION 11. Irrevocability and Modification. This Agreement is irrevocable and may not be amended or modified except by a writing signed by the parties hereto and approved, to the extent required by Applicable Law, by applicable regulatory authority(s). The parties agree that they will execute any amendments requested by El Paso that are necessary to secure and maintain the qualification of the Decommissioning Trust Fund as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law and the deduction of contributions to such Fund as provided by such law, or to comply with Applicable Law.

Not in limitation of the foregoing, if and to the extent that, now or in the future, federal tax law may extend certain tax benefits to a trust fund or funds that are created and maintained by El Paso for creation of a reserve or funds for costs associated with Decommissioning (hereinafter in this Section 11 referred to as such "other trusts") which such other trusts would qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law, including without limitation, Internal Revenue Code section 468A, only if established and maintained pursuant to a single trust agreement for a particular nuclear power plant, the parties hereto, upon the creation of such other trusts may amend this Agreement by attaching hereto as an allonge the governing instruments by which such other trusts may be created. In such event, such other trusts shall be administered under the terms of this Agreement to the extent not inconsistent with the governing instruments by which such other trusts may be created and such other trusts shall thereafter be administered as separate fimds under the terms of this Agreement.

SECTION 12. Obligation for Decommissioning. Nothing in this Agreement and no act or omission relating to the Funds shall be read, construed, understood, or interpreted to place any obligation whatsoever on Decommissioning Trustee or a Fiduciary Investment Manager relating to Decomrniissioning or any Decommissioning Cost, all of which shall at all times remain the sole obligation of El Paso.

SECTION 13. Governing Law. This Agreement shall be deemed to be a contract made in Texas for all purposes and shall be construed in accordance with and governed by the laws of such State, including the provisions of the Texas Trust Code, with respect to all matters of construction, validity, and performance.

SECTION 14. Resignation and Replacement of Decommissioning Trustee or Fiduciary Investment Manager.

(A) Decommissioning Trustee may resign at any time without cause by giving at least 30 days prior written notice to El Paso, and El Paso may remove Decommissioning Trustee at any time with or without cause by giving written notice to Decommissioning Trustee, such resignation or removal to be effective on the acceptance of appointment by a successor Decommissioning Trustee under this Section 14. In case of the resignation or removal of Decommissioning Trustee, El Paso may appoint a successor Decommissioning Trustee by an 14

instrument signed by El Paso. If a successor Decommissioning Trustee shall not have been appointed by El Paso within 30 days after the giving of such written notice of resignation or removal, Decommissioning Trustee or El Paso may apply to any court of competent jurisdiction to appoint a successor Decommissioning Trustee to act until such time, if any, as a successor Decommissioning Trustee shall have been appointed by El Paso and shall have accepted its appointment under this Section 14. Any successor Decommissioning Trustee so appointed by such court shall immediately and without further act be superseded by any successor Decommissioning Trustee appointed by El Paso as provided above.

(i) In appointing a Decommissioning Trustee, El Paso shall have the following duties which will be of a continuing nature:

(a) a duty to determine whether Decommissioning Trustee's fee schedule for administering the trust is reasonable when compared to other institutional trustees rendering similar services; (b) a duty to investigate and determine whether the past administration of trusts by Decommissioning Trustee has been reasonable; (c) a duty to investigate and determine whether the financial stability and strength of Decommissioning Trustee is adequate; (d) a duty to investigate and determine whether Decommissioning Trustee is in compliance with the requirements of this Agreement; and (e) a duty to investigate any other factors which may bear on whether Decommissioning Trustee is suitable.

(ii) Any successor Decommissioning Trustee, however appointed, shall execute and deliver to the predecessor Decommissioning Trustee an instrument accepting such appointment, and thereupon such successor Decommissioning Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties, and trusts of the predecessor Decommissioning Trustee with like effect as if originally named as Decommissioning Trustee herein; and such predecessor Decommissioning Trustee shall duly assign, transfer, deliver, and pay over to such successor Decommissioning Trustee all moneys or other property then held by such predecessor Decommissioning Trustee upon the trusts expressed in this Agreement, shall do all acts necessary to vest title of record in such successor Decommissioning Trustee, and shall transfer and deliver to such successor Decommissioning Trustee copies of all records pertaining to the Funds and this Agreement. In addition, upon the written request of such successor Decommissioning Trustee, such predecessor Decommissioning Trustee shall execute and deliver to such successor Decommissioning Trustee an instrument transferring to such successor Decommissioning Trustee, upon the trusts expressed in this Agreement, all the estates, properties, rights, power, duties, and trusts of such predecessor Decommissioning Trustee.

(iii) Any successor Decommissioning Trustee, however appointed, shall be a bank or trust company with trust powers incorporated and doing business in the United 15

States of America and having net worth of at least $150,000,000, if there be such an institution willing, able and legally qualified to perform the duties of Decommissioning Trustee hereunder upon reasonable or customary terms; provided however, that in calculating the $150,000,000 net worth requirement, the net worth of the Decommissioning Trustee's parent corporation and/or affiliates may be taken into account only if such entities guarantee Decommissioning Trustee's responsibilities to the Funds.

(iv) Any corporation into which Decommissioning Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which Decommissioning Trustee shall be a party, or any corporation to which substantially all the corporate trust business of Decommissioning Trustee may be transferred, shall, subject to the terms of subsection 14(A)(iii), be Decommissioning Trustee under this Agreement without further act.

(v) No successor Decommissioning Trustee (other than a successor by reason of an event described in Section 14(A)(iv)) shall be liable for any act, omission or breach of trust by a predecessor Decommissioning Trustee, whether or not such successor Decommissioning Trustee knows or should have known of such act, omission, or breach of trust, and shall have no duty to compel redress of any breach of trust by a predecessor Decommissioning Trustee.

(B) If a Fiduciary Investment Manager is appointed by El Paso hereunder, such appointment shall be made in writing; however, El Paso may not serve as a Fiduciary Investment Manager. A Fiduciary Investment Manager may resign at any time without cause by giving at least thirty (30) days prior written notice to El Paso, and El Paso may remove a Fiduciary Investment Manager at any time with or without cause by giving written notice to such Fiduciary Investment Manager. The resignation or removal of a Fiduciary Investment Manager is not conditioned on the acceptance of appointment by a successor Fiduciary Investment Manager under this Section 14; provided, however, that if a Fiduciary Investment Manager other than the Decommissioning Trustee resigns or is removed and is not replaced by El Paso, Decommissioning Trustee shall, at that time, assume all investment responsibilities of such Fiduciary Investment Manager.

(i) In appointing a Fiduciary Investment Manager, El Paso shall have the following duties which will be of a continuing nature:

(a) a duty to determine whether such Fiduciary Investment Manager's fee schedule for investment management services is reasonable when compared to other such managers; (b) a duty to investigate and determine whether the past performance of such Fiduciary Investment Manager in managing investments has been reasonable; (c) a duty to investigate and determine whether the financial stability and strength of such Fiduciary Investment Manager is adequate for purposes of liability; 16

(d) a duty to investigate and determine whether such Fiduciary Investment Manager is in compliance with the requirements of its investment management agreement and this Agreement as it relates to investments and to such Fiduciary Investment Manager; and (e) a duty to investigate any other factors which may bear on whether such Fiduciary Investment Manager is suitable.

SECTION 15. Successors and Assigns; Additional Parties. This Agreement shall be binding upon and inure to the benefit of each party and its successors and permitted assigns.

SECTION 16. Termination of Funds. If not otherwise terminated sooner in accordance with the terms of this Agreement, each Fund shall end on the earlier of (A) the date specified in a written agreement between El Paso and Decommissioning Trustee and (B) the date that is twenty-one (21) years less one day after the death of the last survivor of the descendants living on the Effective Date of this Agreement of Joseph P. Kennedy, the father of president John F. Kennedy. Upon such termination, all of the assets of the Funds shall be distributed to El Paso.

Notwithstanding the foregoing provisions of this Section 16, if one or both of the Funds shall be or become valid under Applicable Law for a period subsequent to the date set out in Section 16(B) (or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the creation of such a fund for a period in gross exceeding the period for which such Fund is hereinabove stated to extend and be valid), then such Fund shall not terminate as aforesaid but shall extend to and continue in effect until (but only if such nontermination and extension shall then be valid under Applicable Law) such time as such Fund shall, under Applicable Law, cease to be valid.

SECTION 17. Accountings; Tax Returns and Reports; Audits. Decommissioning Trustee shall keep accurate and detailed records and accounts of all investments, receipts, disbursements and other transactions of the Funds. All accounts, books, and records relating to the Funds shall be open to inspection and audit at all reasonable times by El Paso, its designee or an applicable governmental agency having jurisdiction over the Funds.

Within thirty (30) business days after the end of each calendar month and within thirty (30) business days after the close of each annual accounting period of each Fund, and as soon as reasonably practicable after the resignation or removal of a Decommissioning Trustee has become effective, Decommissioning Trustee shall furnish to El Paso a written account setting forth all (A) investments, receipts, disbursements, and other transactions effected by it during such month or year, as applicable, or during the part of the month or year to the date any such resignation or removal is effective, as applicable, and containing a description of all assets, including but not limited to all securities, purchased and sold (the description of the securities purchased must state the price at which each individual security was purchased), the cost or net proceeds of sale, and the securities and investments held at the end of such period, (B) the gains or losses realized by each Fund upon sales or other disposition of its assets, (C) the increase or decrease in the value of each Fund, (D) the fair market values of each Fund, and (E) the liabilities (excluding liability for Decommissioning) of the Funds incurred or unpaid at the end of such period. Within three (3) business days after the end of each calendar month and within three (3) business days after the close of each annual accounting period of each Fund, and as soon as reasonably practicable after the resignation or removal of a Decommissioning Trustee 17

has become effective, Decommissioning Trustee shall also provide El Paso secured web-based access to the information described in clauses (A) - (E) of this Section 17. The accounting shall also furnish El Paso such other information as Decommissioning Trustee may possess and as may be necessary for El Paso, Decommissioning Trustee and/or a Fiduciary Investment Manager to comply with any reporting requirements applicable to any of such parties and/or the Funds. If the fair market value of an asset in a Fund is not available, when necessary for accounting or reporting purposes the fair market value of the asset shall be determined in good faith by Decommissioning Trustee, assuming an orderly liquidation at the time of such determination. In addition, upon the written request of El Paso, which may be at any time and from time to time, Decommissioning Trustee shall provide El Paso the fair market value of the assets in a Fund as of a date other than the last day of a month or an annual accounting period of a Fund. If there is a disagreement between the Decommissioning Trustee, a Fiduciary Investment Manager and/or any other party as to any act or transaction reported in an accounting, Decommissioning Trustee or the Fiduciary Investment Manager, as applicable, shall have the right to have such disagreement settled by a court of competent jurisdiction. Decommissioning Trustee shall make such other reports as may be agreed upon in writing with El Paso.

Decommissioning Trustee shall retain its records and accountings related to the Funds as long as necessary for the proper administration thereof and at least for any period required by any applicable law, but with respect to each record and account for not less than six (6) years following the creation thereof.

El Paso shall have the right to cause the books, records, and accounts of Decommissioning Trustee that relate to the Funds to be examined and audited by independent auditors designated by El Paso at such times as El Paso may determine, and Decommissioning Trustee shall make such books, records, and accounts available for such purposes at all reasonable times.

El Paso shall, with the cooperation of Decommissioning Trustee, prepare or, upon agreement of Decommissioning Trustee, authorize Decommissioning Trustee to prepare, such tax returns and other reports for or with respect to each Fund as may be required from time to time by Applicable Law.

SECTION 18. Rights of Decommissioning Trustee.

(A) Decommissioning Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Agreement or required by the Texas Trust Code, and no implied duties or obligations shall be read into this Agreement against Decommissioning Trustee except such as are required by the Texas Trust Code.

(B) Decommissioning Trustee shall not have any obligation to invest, manage, control, make any payment from, or otherwise deal with, the Funds except as expressly provided herein or in written guidelines or instructions received pursuant to the terms hereof.

(C) Decommissioning Trustee may rely and shall be protected in acting upon any certificate, statement, notice, or other writing believed by it to be genuine and to have been signed or presented by the proper party or parties, and unless it has actual knowledge to the contrary, Decommissioning Trustee shall not be bound to make any investigation into the facts or matters stated in any certificate, statement, notice, or other writing received by it.

18

(D) In the administration of the Funds hereunder, Decommissioning Trustee may execute any of the trusts or powers hereof and perform its powers and duties hereunder directly or through agents or attorneys and may consult with counsel, accountants and other skilled persons to be selected and employed by it, and Decommissioning Trustee shall not be liable for anything done or omitted by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons to the extent permitted by law and to the extent no such action or omission constitutes negligence or willful misconduct by Decommissioning Trustee.

(E) With respect to any obligation of El Paso hereunder to indemnify Decommissioning Trustee, Decommissioning Trustee shall look solely to El Paso and shall not have any lien upon the assets of the Funds to secure such obligation.

SECTION 19. Notices.

(A) Except as otherwise provided in this Agreement, all notices under this Agreement shall be in writing and be effective upon receipt if delivered by (1) hand, (2) certified or registered United States Mail postage prepaid, or (3) facsimile, provided that service by facsimile after 5:00 p.m. local time of the recipient shall be deemed delivered on the following business day, as follows:

If notice is to the Trustee:

Bank of America Attention: El Paso Electric Company Relationship Manager 303 West Wall P.O. Box 270 Midland, TX 79702-0270 If notice is to the Grantor:

El Paso Electric Company Attention: Controller 123 W. Mills Avenue El Paso, Texas 79901 Facsimile (915) 521-4772 and, if the notice is sent for the purposes described in Sections 5, 14(A), 14(B), and 19(B), with a copy to:

El Paso Electric Company Office of the General Counsel 123 W. Mills Avenue El Paso, Texas 79901 Facsimile (915) 521-4747 (B) Each person may change its address for purposes of notice under this Agreement 19

by notice complying with Section 20(A).

Any notice required under this Agreement may be waived in writing by the party entitled thereto.

SECTION 20. Counterpart Execution. This Agreement may be executed in any number of counterparts and by each of the parties hereto on separate counterparts; all such counterparts shall together constitute but one and the same instrument.

SECTION 21. Effective Date. This Agreement shall become effective on the "Effective Date" as defined herein.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed as of the day and year above written.

20

EL PASO:

EL PASO ELECTRIC COMPANY By: -(3 im

Title:

&W a DECOMMISSIONING TRUSTEE:

BANK OF AMERICA, N.A., a national banking association P

By:, ,4"i A Tit ice President STATE OF TEXAS §

§ ss.

COUNTY OF EL PASO § Theforegoing instrument was acknowledged before me this .ZZ.. day of A2cmlt.1 by 3*t_)} M/? ) of EL PASO ELECTRIC COMPANY, a Texas corporation, on behalf of said corporation.

,I' Al Notary Public My commission expires:

La\5)av7 21

Appendix A to Decommissioning Trust Agreement for Palo Verde Nuclear Generating Station Unit 3 DEFINITION OF TERMS ANPP Participation Agreement shall mean the Arizona Nuclear Power Project Participation Agreement, dated as of August 23, 1973, as amended, among Arizona Public Service Company, Salt River Project Agricultural Improvement and Power District, Southern California Edison Company, Public Service Company of New Mexico, Southern California Public Power Authority, Department of Water and Power of The City of Los Angeles, and El Paso.

Applicable Law shall mean all applicable laws, statutes, treaties, rules, codes, ordinances, regulations, permits, certificates, orders, interpretations, licenses, and permits of any federal, state, county, municipal, foreign, international, regional, or other governmental authority, agency, board, body, instrumentality, or court, and judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator, or other judicial or quasi-judicial tribunal (including those pertaining to health, safety, the environment, or otherwise).

Applicable Tax Law shall mean Code Section 468A, any comparable subsequent provisions of the Code, the United States Treasury regulations promulgated under such section or provisions, and other provisions of the Code relating to the federal taxation of the Funds.

Code shall me'an the Internal Revenue Code of 1986, as amended, or any successor law.

Decommissioning shall mean the decommissioning and retirement from service of Unit 3, and the related possession, maintenance, and disposal of material, radioactive or otherwise used in or produced by or relating to Unit 3, including, without limitation: (i) placement and maintenance in a state of protective storage; (ii) in-place entombment and maintenance; (iii) dismantlement; (iv) removal, decontamination and disposition of equipment and fixtures; (v) razing; (vi) removal and disposition of debris related to Unit 3 from the PVNGS Site; (vii) restoration of the PVNGS Site related to Unit 3 for unrestricted use; (viii) any other actions relating to decommissioning and retirement from service of Unit 3 required by the NRC; and (ix) all activities undertaken incident to the implementation thereof.

Decommissioning Cost shall mean El Paso's pro-rata share, under the ANPP Participation Agreement, of the greater of (i) the latest estimate of Termination Costs (as that term is defined by the ANPP Participation Agreement) for Unit 3 or (ii) the minimum amount required by the NRC to be funded for the decommissioning of Unit 3.

Deemed Distribution Amount shall mean an amount in the Decommissioning Trust Fund that is treated by Applicable Tax Law as having been distributed by reason of the disqualification of all or a part of such Fund.

Excess Contribution shall mean the amount by which cash payments made (or deemed made) by El Paso into the Decommissioning Trust Fund during any taxable year of El Paso exceeds the payment limitation imposed by Applicable Tax Law.

Expenses shall mean: (a) in the case of the Decommissioning Trust Fund, (i) the tax imposed by Code Section 468A(e)(2); (ii) any state or local tax imposed on the income or the assets of such Fund; and (iii) legal, accounting, and actuarial fees and expenses, trustee's fees and expenses, and all other ordinary administrative costs and incidental expenses, incurred by Decommissioning Trustee, a Fiduciary Investment Manager, or El Paso in connection with the operation of such Fund, but in each case only to the extent permitted by Code Section 468A(e)(4)(B) or other Applicable Tax Law to be paid from the assets of a "Nuclear Decommissioning Reserve Fund," as that term is used in Applicable Tax Law; and (b) in the case of the Second Fund, (i) any federal, state, or local tax actually paid by El Paso with respect to the income or the assets of such Fund including a payment to El Paso of the federal income tax (at the statutory rate) with respect to the taxable income of such Fund required to be included on El Paso's federal income tax return; and (ii) legal, accounting and actuarial expenses, trustee's fees and expenses, and all other ordinary administrative costs and incidental expenses, incurred by Decommissioning Trustee, a Fiduciary Investment Manager, or El Paso in connection with the operation of such Fund; provided, however, Expenses shall not include taxes on or with respect to fees paid to Decommissioning Trustee or a Fiduciary Investment Manager and taxes that Code Section 4951 requires be paid by Decommissioning Trustee.

Fiduciary Investment Manager shall mean any institution or professional appointed by El Paso, other than Decommissioning Trustee, who is responsible for the investment and reinvestment of the Funds.

License shall mean NRC Facility Operating License No. NPF-41, issued December 31, 1984, as the same may be amended, modified, extended, renewed or superseded from time to time.

NRC shall mean the Nuclear Regulatory Commission of the United States of America or any successor agency.

PVNGS shall mean the Palo Verde Nuclear Generating Station, which is located on the PVNGS Site.

PVNGS Site shall mean the real property located in Maricopa County, Arizona, approximately 36 miles west of the City of Phoenix, Arizona and approximately 16 miles west of the City of Buckeye, Arizona, which legal description is contained in Appendix B to the ANPP Participation Agreement.

Qualified Investments shall mean investments that meet the intent, standards, liabilities, and general and specific requirements and conditions on investments as set forth in Section 7 herein.

Unit 3 shall mean the 1,270 megawatt unit, commonly known as Unit 3, at PVNGS.

Palo Verde Nuclear Generating Station Appendix C, Tab 4 SCE 2004 Annual Funding Status Report SCE reports that its Master Trust Agreement was amended December 23, 2003.

A copy of the amendment is enclosed.

AMENDMENT NO. 1 SOUTHERN CALIFORNIA EDISON COMPANY NUCLEAR FACILITIES QUALIFIED CPUC DECOMMISSIONING MASTER TRUST AGREEMENT FOR SAN ONOFRE AND PALO VERDE NUCLEAR GENERATING STATIONS As Amended and Restated November 1,2002 WHEREAS, the California Public Utilities Commission, the Southern California Edison Company, and Mellon Bank, N.A. (the "Parties") have executed the Southern California Edison Company Nuclear Facilities Qualified CPUC Decommissioning Master Trust Agreement for San Onofre and Palo Verde Nuclear Generating Stations as Amended and Restated November 1,2002 (the

'Master Trust Agreement") and the Parties desire to amend the Master Trust Agreement; NOW, THEREFORE, the Master Trust Agreement is amended as provided herein below effective December 23, 2003.

The introductory text of Article II is amended to read as follows:

11.

DISPOSITIVE PROVISIONS After payment of the expenses described in Section 6.01 hereof, the Trustee shall distribute the Master Trust as provided in this Article II. Except for payments or disbursements made pursuant to Section 2.01 or cs otherwise permitted under paragraph 50.82(a)(8) of Title 10 of the Code of Federal Regulations, no disbursement or payment may be made from the Master Trust until written 1

notice of the intention to make disbursement or payment has been given to the Nuclear Regulatory Commission Director of the Office of Nuclear Regulation, or Director of the Office of Nuclear Material Safety and Safeguards, as applicable, at least 30 working days before the date of the intended disbursement or payment.

IN WITNESS WHEREOF, the Parties have executed this Amendment No. 1 effective December 23, 2003.

CALIFORNIA PUBLIC UTILITIES COMMISSION By: ldAA

Title:

. At SOUTHERN CALIFORNIA EDISON COMPANY By :_ Attest, , P T'e: SVPA C-F-0 litM I k-1/

MELLON BANK, NA.

B B22V in Attest 9 e

.,7tle: WI' Trile:-

2

Palo Verde Nuclear Generating Station Appendix C, Tab 5 PNM 2004 Annual Funding Status Report PNM reports that its Master Trust Agreement was amended December 16, 2003.

A copy of the amendment is enclosed.

AMENDMENT NUMBER TWO Pe, TO THE PUBLIC SERVICE COMPANY OF NEW MEXICO MASTER DECOMMISSIONING TRUST AGREEMENT FOR PALO VERDE NUCLEAR GENERATING STATION This Amendment Number Two to the Public Service Company of New Mexico

['#7 Master Decommissioning Trust Agreement for Palo Verde Nuclear Generating Station (the "Agreement') made this 16th day of December, 2003, by and between Public Service Company of New Mexico, a corporation organized and existing under the laws of the State of New Mexico (the "Company"), and Mellon Bank, N.A., a national banking association having trust powers (the "Trustee").

WITNESSETH:

WHEREAS, the Company entered into the Agreement with the Trustee on March 15, 1996 to satisfy the Company's obligation to accumulate funds for the payment of its share of Termination Costs for Palo Verde Unit 1, Palo Verde Unit 2 and Palo Verde Unit 3, in accordance with the requirements of Section 8A.7.2 of the ANPP Participation Agreement; and WHEREAS, the Company and Trustee amended the Agreement on January 24, 1997; and WHEREAS, the Company is subject to regulation by the Nuclear Regulatory Commission ("NRC"); and WHEREAS, the NRC has issued amendments (the "NRC Amendments") to its regulations relating to disbursements or payments, as published in the FederalRegister and to become effective on December 24,2003; and WHEREAS, Section 2.11 of the Agreement allows the Trustee and the Company to amend the Agreement consistent with the purposes of the Agreement; and WHEREAS, it is appropriate at this time to amend the Agreement to conform to the NRC Amendments prior to the NRC deadline.

NOW THEREFORE, the Company and the Trustee hereby amend the Agreement, as amended, to include said amendments to NRC regulations:

1. The following Paragraph (5) shall be added to Section 2.01:

Notwithstanding anything to the contrary in this Agreement, except for (i) payments of ordinary administrative costs (including taxes) and other PC Docs 55216v2

incidental expenses of the Funds (including legal, accounting, actuarial, and trustee expenses) in connection with thedoperation of the Funds, (ii) withdrawals being made under 10 CFR 50.82(a)(8), and (iii) transfers between Qualified and Nonqualified Funds in accordance with the provisions of this Agreement, no disbursement or payment may be made from the Funds until written notice of the intention to make a disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, at least 30 working days before the date of the intended disbursement or payment. The disbursement or payment from the Funds, if it is otherwise in compliance with the terms and conditions of this Agreement, may be made following the 30-working day notice period if no written notice of objection from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, is received by the Trustee or the Company within the notice period. The required notice may be made by the Trustee or on the Trustee's behalf. This Paragraph 2.01(5) is intended to qualify each and every provision of this Agreement allowing distributions from the Funds, and in the event of any conflict between any such provision and this Paragraph, this Paragraph shall control.

2. Except as set forth herein, the Agreement is hereby ratified and confirmed and remains in full force and effect.

3. Each of the parties represents and warrants to the other parties that it has full authority to enter into this Amendment upon the terms and conditions hereof and that the individual executing this Amendment on its behalf has the requisite authority to bind the respective parties to this Amendment.

IN WITNESS WHEREOF, the parties hereto, each intending to be legally bound hereby, have hereunto se} their hands and seals as of the day and year first above written.

PUBLIC SERVICE COMPANY OF NEW MEXICO By:_

Name: 7 / X7 iE

Title:

i MELLON BANK, N.A.

By:Na - /

Name:-7Evq, c,.Joi Ti:V/CM A5,ovv PC Docs 55216v2

Palo Verde Nuclear Generating Station Appendix C, Tab 6 SCPPA 2004 Annual Funding Status Report SCPPA reports that its Master Trust Agreement was amended November 1, 2003.

A copy of the amendment is enclosed.

From:SCPPA 626 793 9364 03/12/2004 14:41 #192 P.002 AMENDMENT NO. 2 TO DECOMMISSIONING TRUST FUND AGIREEMZNT I By and Between SOUTHBRN CALIFORNX4 KUBLJC POWER A1JTUTrYo}

as Grantor and U.S. BANK NATIONAL ASSOCIATION, as Trustec 4536ss52.3 t86-d AeOJ/zood IEt-I 8100131P 1P! IRN4vuJi cdOZ:to tc-ZI-Jtl

From:SCPPA L-f%- -700 COR QZV I W VVV4 03/12/2004 14:41 #192 P.003 This Amendment No. 2 To Deconlissioning Trust Fund Agreement I is entered into as of November 1, 2003, by and between Southern California Public Power Authority (thc "Authority' or the "Graor") a public entity organized pursuant to the lawis of the Statc of California, and U.S. Bank National Association, a national barildng association having Irumt powers and organized under the laws of the Unitcd States, as suce9ssor Trustee (the "Trustee").

WVEREAS, the Authority and the Trustee have heretofore entered into a Decommissioning Trust Fund Agreement I dated as of Tuly 13, 1990 (as amended by Amendmcat No. 1 to Decornnissioning Trust Fund Agreement I dated October27, 1992, the

'Deconnissloning Trust Fund Agreement I');

WHEREAS, the Authority has determined that it is necessary and desirable to enter into this Amendment No. 2 to Decnissioning Trust Fund Agreement I to better conform &uch Agreement to new miedmets to the federal reglations of the United States Nuclear Regulatory Commission relating to deconuissioning trust funds for nuclear power plants.

NOW, TIHR ORE In consideration of the mutual promises, covenants and conditions contained herein, the parties agree a follows:

SECTION 1. The Dec inmissoning Trust Fund Agrement 1 is bermby amended add the following new Section 2.08 thereo, as follows:

2.08 Notice of Witha Notwithstanding anything to the cWotrary in this Ageerneut, except for payunento for administrative costs (including taxes) and other incidental expenses of the Trust Fund (including legal, aacomting, actuarial, and Trustee expenscs) in connecion with the operation of the Trust Fund, no disbursemnts or payments fro the Th~st Fund shall be made: (1) nless 30 working dayt prior written notice of such disbumemcrnt or payment has been made by the Grantor or the Trustee IO the NRC or (2) If the Trustee receivcs wriltn notice of an objection from the NRC's Director of ffie Office ofNuclear Reactor Regulation or the Director of the Oflace of Nuclear Material Safety and Safeguards, as applicable. to such disbursement or payment; provided, however, that the foregoing shall not apply if the Grantor is making a withdrawal pursuant to Section 50.82(a)(8) of the Regulations (or any successor section of the Rcgulatons). If the Trustee receives such a notice of objection from the NRC, then the Trustee shall immediately provide to the Grantor a copy of the writte objection, and the Grantor shall take such actions, if any, as it determines appropriate with respect to such notice of objection Written notices of disbursement or payment made as described above shall Include the name and address of the Trustee and the atnie of R contact person at the Trustee. In addition, if the Trustee is uncertain as to whether a proposed disbursement or payment Is exempt from the restrictions on disbursements or payments from the Trust Fund, then upon the written request of the Trustee to the Gantor, the Grantor shall provide to tho Trustee such infonration or cerdzi cations as are reasonably requcstedby the Trustee.

PBL- loo/Eoo l1E0-1 EIUt3l1?Ii4 l51J4I1WUJi udoZill #UsZL-J'~

Fr.om:SCPPA 626 793 9364 03/12/2004 14:48 #192 P.004 I,

IN WInWESS WEOP. the parties hereto have executed this Amendment No. 2 to Deconissioning Trust Fund Agrcernemt I by their duly suthorizod officcrs on the day and year fnis above written.

U.S. BRNA NATIONAL ASSOCIATION, SOUTHERN CALOBRNIA PUBUC as Trstee 0 A POWER AUTHORITY RVx By:

A1 rized Officer President Aftct' s&t;_/

S=0ay",e 433662SI3

-_ ._ .- "H tal-d 160/p00 d sto-1 1lt10031lz %qljjqjMj.x0jd lWal; tu VD-41-j'"

From: SCPPA 626 793 9364 03/12/2004 14:48 #192 P.005 AMENDMENT NO. 2 TO DECOMISSIONING TRUST FUND AG)MEMENT II By and Between SOUTHEIRN CALIFORNIA PUBLIC POWER AUTHORITY, as Grantor 0 antd U.S. BANK NATIONAL ASSOCIATTON, as Trustee 4S3S125412 IU vol-d 10CADO'd sto-1 lq3!jqjpj-mjj mw IV TV-& I- -11

From:WA 626 793 9364 03/12/2004 14:48 #192 P.006 This Amendment No. 2 to Decommissioning Trust Fund Agremnt U is entered into as of November 1, 2003, by and between Southeem California Public Power Aulhonty (the "Authority" or the "Grantor"), a public entity organizcd pursuant to the laws of the State of California, and U.S. Bank National Association, a national bankdng association having Inxst powers and organized under the laws of the United States, as successor Trustee (the "Trustee").

WEREAS, tbc Authority and the Trustee have heretofore cntered into a Decommissioning Trust Fund Agreement [I dated as of July 13. 1990 (as amended by Amendment No. I to Decommissioning Trust Fund Agreeenat U dated October 27, 1992, the "Decommissioning Trust Fund Agreemcnt W");

WREREAS, the Authority has determined that it Is neeessary and desirable to cuetr into this Amendment No. 2 to Decommissioning Trust Fund Agreement n to better conform such Agrement to new amendments to the federal raulations of the United States Nuclear Regulatory Commission relating to decormissioning u= funds for nuclearpower plants.

NOW, THEREFORE, in consideration of the mutul promises, covenants and conditions contained herein, the parties agrce as follows:

SECTION 1. The Dcomnmissioning Tnusi Fund Agreement U is hereby amended to add the following new Section 2.08 thereto, as follows:

2.08 Notice of Withdrwals from Trust Fynd. Notwithstanding anything to the contr-y in this Agreemnent, except for psyments for administrative costs (including taxes) and other incidental expcnses of the Trust Fund (including legal. accoung. sctuarial, and Trustee expenses) in connection with the operation of the Trust Fund, no disbursements or payrneuts from the Trust Fund shall be made; (1) unless 30 worldng dayS prior vviin notice of such disbursement or payment has been Tnade by the Grantor or the Trustee to the NRC or (2) if the Trustee receivecs written notice of an objection from the NRC's Director of the Office of Nuclear Reactor Riegulation or the Director of the Office of Nucear Matcrial Safety and Safeguards, as applicable. to such disbrsement or payment; provided, however, that the foregoing sball not apply if the GChntcris malaing a withdrawal pursuant to Section S0.82(a)(8) of the Regulations (or %ucstpr.tecticn of tUit Rtglatichs). It the fiustc# rec ives stch wLotice of objection fnbm.theNRCfth4i~the Trustee sdiat&Iyjprvide to the GraMtor a doydt cewrnticn objection, dAid h4Itd sliall .tckc su~h actions iC F, as it dat&Tninc app ate with

-Gmttor respect to ^hch notice, bf octectiA. Written DOtirks of disbufsemzitt or p-ayant nide as -

described aboveh"ll iclude .Te flame And ajdress of th6 Triue aid the nan of a ¢ont.

person at.-!e Thtstee.. In. idditidn, if the trusted is iicrtain -as to Wather :a proptsed disbutsieati orfp*yment isciempt fiom ihe r~ticti6ds on disbutse idxts or )aymnnts f ftinthe TnastRfieu uthea n ttei requ.te of the Thxstee to the rkantor, the Grptor shall provide-:-

to the2Truc such formati& or crtilieaious as are easonaby rcquested by the Trusttc-

From:SCPPA 626 793 9364 03/12/2004 14:49 #192 P.007 I.

N WITGESS WHEREOF, the paries hereo have executed this Amendmcnt No. 2 to Deccriasioging Trust Fund Agecnment II by their duly muthonszd of icers on the day and year first above written.

U.S. BANK NATIONAL ASSOCIATION.

ai Txustclc - SOUTHERN CALIFOPNIA PUBLIC POWER AUTHORlIY By  ; I "I

(, President Attest: _ &03

-- I ~Secre 2~

.I.

k1:

t>,4 41511"2..

111-d 49141194' 1t0-1 6108231Wl MIN-llVaid ItlsRIC 19-110JI-

Palo Verde Nuclear Generating Station Appendix C, Tab 7 LADWP 2004 Annual Funding Status Report LADWP reports that its Master Trust Agreement was amended February 4, 2004.

A copy of the amendment is enclosed.

AMENDMENT NO. 2 TO THE DECOMMISSIONING TRUST FUND AGREEMENT II This Amendment No. 2 to Decommissioning Trust Fund Agreement Il is entered into between the City of Los Angeles acting by and through the Los Angeles Department of Water and Power ("LADWP"), and U.S. Bank National Association, a national banking association having trust powers and organized under the laws of the United States, as successor trustee (the 'Trustee 3 ).

WHEREAS, LADWP and Security Pacific National Bank, as predecessor trustee, entered into a Decommissioning Trust Fund Agreement II dated as of July 17, 1990 (as amended by Amendment No. 1 to Decommissioning Trust Fund Agreement II dated February 20, 1991, the Decommissioning Trust Fund Agreement ll") to establish a trust fund to provide financial assurance required by the United States Nuclear Regulatory Commission and the Arizona Nuclear Power Project Participation Agreement for decommissioning activities with respect to LADWP's interest in the Palo Verde Nuclear Generating Station; and WHEREAS, U.S. Bank National Association is the successor by merger to U.S.

Bank Trust National Association, successor trustee to Bank of America National Trust and Savings Association, successor by merger to Security Pacific National Bank; and WHEREAS, LADWP has determined that it is necessary and desirable to enter into this Amendment No. 2 to Decommissioning Trust Fund Agreement II to better conform such Agreement to new amendments to the federal regulations of the United States Nuclear Regulatory Commission relating to decommissioning trust funds for nuclear power plants, to reflect the current addresses for delivery of any notices required under the Agreement, and to update the Agreement to better conforrn with LADWP's business policies.

NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions contained herein, the parties hereto agree as follows:

1. Section 2.01.b is amended to read as follows:

2.01.b Disbursements. The Trustee shall apply amounts on deposit in the Trust Fund to the payment or reimbursement of Decommissioning Costs upon receipt by the Trustee of a Certificate stating with respect to each application for payment: (1) The name and address of the person to whom payment is due, which may be LADWP; (2) the amount of money to be paid; (3) that the obligation to be paid is a Decommissioning Cost; (4) that such payment is in accordance with the Decommissioning Plan; and (5) whether notice to the NRC of such payment, pursuant to Section 2.09 hereof, is required or has previously been made.

2. Section 2.09 is added to read as follows:

2.09 Notice of Withdrawals from Trust Fund. Notwithstanding anything to the contrary in this Agreement, except for payments for-administrative costs (including taxes) and other incidental expenses of the Trust Fund (including

legal, accounting, actuarial, and Trustee expenses) in connection with the operation of the Trust Fund, no disbursements or payments from the Trust Fund shall be made: (1) unless 30 working days prior written notice of such disbursement or payment has been made by LADWP or the Trustee to the NRC or (2) if the Trustee receives written notice of an objection from the NRC's Director of the Office of Nuclear Reactor Regulation or the Director of the Office of Nuclear Material Safety and Safeguards, as applicable, to such disbursement or payment; provided, however, that the foregoing shall not apply if LADWP is making a withdrawal pursuant to Section 50.82(a)(8) of the Regulations (or any successor section of the Regulations). If the Trustee receives such a notice of objection from the NRC, then the Trustee shall immediately provide to LADWP a copy of the written objection, and LADWP shall take such actions, if any, as it determines appropriate with respect to such notice of objection. Written notices of disbursement or payment made as described above shall include the name and address of the Trustee and the name of.a contact person at the Trustee.

3. Section 8.06 is amended to read as follows:

8.06 Delivery of Notices Udder Agreement. Any notice required by this Agreement to be given to LADWP or the Trustee shall be personally delivered, sent by overnight courier, telecommunicated, or mailed, postage prepaid, by registered or certified mail, to the person to be notified as set forth below:

If to LADWP:

Los Angles Department of Water and Power 111 North Hope Street, Room 456 Los Angeles, CA 90012 Attention: Chief Financial Officer Fax: (213) 367-3909 If to the Trustee:

U.S. Bank National Association 633 West Fifth Street, 24th Floor Los Angeles, CA 90071 Attention: Corporate Trust Services Fax: (213) 615-6196 LADWP or the Trustee may change its address, or add additional addresses for notices to be given to it hereunder by delivering notice thereof in writing to the other party.

4. Section 8.13 is amended to read as follows:

8.13 Affirmative Action Plan. The Trustee shall comply with-the Los Angles City Affirmative Action requirements for non-construction contractors, in accordance with Trustee's affirmative action plan on file with and approved by the Office of Contract Compliance of said City.

5. Section 8.14 is amended to read as follows:

8.14 Service Contract Worker Retention and Living Wage Policy. The Trustee is subject to the Service Contractor Worker Retention Ordinance and the Living Wage Ordinance of the Los Angeles Administrative Code. The Ordinances require that, unless specific exemptions apply, employers who are awarded service contracts that involve expenditures in excess of $25,000 and have a duration of at least three months shall comply with the provisions of the Ordinances.

6. Section 8.15 is added to read as follows:

8.15 Child Support Policy. The Trustee must comply with all lawfully served Wage and Eamings Assignment Orders and Notices of Assignment in accordance with Califomia Family Code. The Trustee must certify that such compliance will be maintained throughout the term of this Agreement.

7. This Amendment No. 2 and Decommissioning Trust Fund Agreement II, as amended on February 20, 1991, represents the complete agreement of the parties with respect to the subject matter thereof, and supercedes all prior agreements and understandings with respect to such subject matter.

8. Except as provided herein, Decommissioning Trust Fund Agreement II, as amended on February 20, 1991, shall remain in full force and effect.

9. Each patty was represented by legal counsel during the negotiation and execution of this Amendment No. 2.

10. The Signatories hereto represent that they have been appropriately authorized to enter this Amendment No. 2 on behalf of the Party for whom they signed.

11. Effective Date. This Amendment shall be effective upon execution by the parties to this Amendment.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2 to Decommissioning Trust Fund Agreement 11on , 2003.

DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS ANGELES C>

ca_z 3

By ml BOARD OF WATER AND POWER COMMISSIONERS D OF THE CITY OF LOS ANGELES Dated:

APPROVED AS TO FORM AND LEGAL M _

ROCKARD J.DELGADiLUO, CrrY ATTORNEY rnCo OCT 1 6 2003 BY Dated: by I 2e Linda Verstuyft Vice President REQUIRESTY 0 UNCIL APROVAL

AMENDMENT NO. 2 TO THE DECOMMISSIONING TRUST FUND AGREEMENT I This Amendment No. 2 to Decommissioning Trust Fund Agreement I is entered into between the City of Los Angeles acting by and through the Los Angeles Department of Water and Power ("LADWP"), and U.S. Bank National Association, a national banking association having trust powers and organized under the laws of the United States, as successor trustee (the "Trustee").

WHEREAS, LADWP and Security Pacific National Bank, as predecessor trustee, entered into a Decommissioning Trust Fund Agreement I dated as of July 17, 1990 (as amended by Amendment No. I to Decommissioning Trust Fund Agreement I dated February 20, 1991, the 'Decommissioning Trust Fund Agreement I") to establish a trust fund to provide financial assurance required by the United States Nuclear Regulatory Commission and the Arizona Nuclear Power Project Participation Agreement for decommissioning activities with respect to LADWP's interest in the Palo Verde Nuclear Generating Station; and WHEREAS, U.S. Bank National Association is the successor by merger to U.S.

Bank Trust National Association, successor trustee to Bank of America National Trust and Savings Association, successor by merger to Security Pacific National Bank; and WHEREAS, LADWP has determined that it Is necessary and desirable to enter into this Amendment No. 2 to Decommissioning Trust Fund Agreement I to better conform such Agreement to new amendments to the federal regulations of the United States Nuclear Regulatory Commission relating to decommissioning trust funds for nuclear power plants, to reflect the current addresses for delivery of any notices required under the Agreement, and to update the Agreement to better conform with LADWP's business policies.

NOW, THEREFORE, in consideration of the mutual promises, covenants and, conditions contained herein, the parties hereto agree as follows:

1.Section II, Dispositive Provisions, 1.01 is renumbered as 2.01 and shall read as follows:

2.01 Payment of Decommissioning Costs. The Trustee shall make payments of the Decommissioning Costs in accordance with the procedures described below.

a. Authorized Regresentative. LADWP shall promptly notify the Trustee in writing of (a)the identity of its Authorized Representatives, and (b) the termination of any Authorized Representative's authority. The Trustee shall have no duty to inquire into or investigate the continued authority of such persons to act as the Authorized Representative

b. Disbursements. The Trustee shall apply amounts on deposit in the Trust Fund to the payment or reimbursement of Decommissioning Costs upon receipt by the Trustee of a Certificate stating with respect to each application for payment: (1)The name and address of the person to whom payment is due, which may be LADWP; (2)the

amount of money to be paid; (3) that the obligation to be paid is a Decommissioning Cost; (4) that such payment is in accordance with the Decommissioning Plan; and (5) whether notice to the NRC of such payment, pursuant to Section 2.09 hereof, is required or has previously been made.

2. Section 2.09 is added to read as follows:

2.09 Notice of Withdrawals from Trust Fund. Notwithstanding anything to the contrary In this Agreement, except for payments for administrative costs (including taxes) and other incidental expenses of the Trust Fund (including legal, accounting, actuarial, and Trustee expenses) in connection with the operation of the Trust Fund, no disbursements or payments from the Trust Fund shall be made: (1) unless 30 working days prior written notice of such disbursement or payment has been made by LADWP or the Trustee to the NRC or (2) if the Trustee receives written notice of an objection from the NRC's Director of the Office of Nuclear Reactor Regulation or the Director of the Office of Nuclear Material Safety and Safeguards, as applicable, to such disbursement or payment; provided, however, that the foregoing shall not apply if LADWP is making a withdrawal pursuant to Section 50.82(a)(8) of the Regulations (or any successor section of the Regulations). Ifthe Trustee receives such a notice of objection from the NRC, then the Trustee shall immediately provide to LADWP a copy of the written objection, and LADWP shall take such actions, if any, as it determines appropriate with respect to such notice of objection. Written notices of disbursement or payment made as described above shall include the name and address of the Trustee and the name of a contact person at the Trustee.

3. Section 8.06 is amended to read as follows:

8.06 Deliverv of Notices Under Agreement. Any notice required by this Agreement to be given to LADWP or the Trustee shall be personally delivered, sent by overnight courier, telecommunicated, or mailed, postage prepaid, by registered or certified mail, to the person to be notified as set forth below:

If to LADWP:

Los Angles Department of Water and Power 111 North Hope Street, Room 456 Los Angeles, CA 90012 Attention: Chief Financial Officer Fax: (213) 367-3909 If to the Trustee:

U.S. Bank National Association 633 West Fifth Street, 24a] Floor Los Angeles, CA 90071 Attention: Corporate Trust Services Fax: (213) 615-6196

LADWP or the Trustee may change its address, or add additional addresses for notices to be given to it hereunder by delivering notice thereof in writing to the other party.

4. Section 8.13 is amended to read as follows:

8.13 Affirmative Action Plan. The Trustee shall comply with the Los Angles City Affirmative Action requirements for non-construction contractors, in accordance with Trustee's affirmative action plan on file with and approved by the Office of Contract Compliance of said City.

5. Section 8.14 is amended to read as follows:

8.14 Service Contract Worker Retention and Living Wage Policy. The Trustee is subject to the Service Contractor Worker Retention Ordinance and the Living Wage Ordinance of the Los Angeles Administrative Code. The Ordinances require that, unless specific exemptions apply, employers who are awarded service contracts that involve expenditures in excess of $25,000 and have a duration of at least three months shall comply with the provisions of the Ordinances.

6. Section 8.15 is added to read as follows:

8.15 Child Support Policy. The Trustee must comply with all lawfully served Wage and Earnings Assignment Orders and Notices of Assignment in accordance with California Family Code. The Trustee must certify that such compliance will be maintained throughout the term of this Agreement.

7. This Amendment No. 2 and Decommissioning Trust Fund Agreement I, as amended on February 20, 1991, represents the complete agreement of the parties with respect to the subject matter thereof, and supercedes all prior agreements and understandings with respect to such subject matter.

8. Except as provided herein, Decommissioning Trust Fund Agreement I, as amended on February 20, 1991, shall remain in full force and effect.

9. Each party was represented by legal counsel during the negotiation and execution of this Amendment No. 2.

10. The Signatories hereto represent that they have been appropriately authorized to enter this Amendment No. 2 on behalf of the Party for whom they signed.

11. Effective Date. This Amendment shall be effective upon execution by the parties to this Amendment.

INWITNESS WHEREOF, the parties hereto have executed this Amendment No. 2 to Decommissioning Trust Fund Agreement I on , 2003.

DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS ANGELES :I,

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BOARD OF WATER AND POWER COMMISSIONERS F:1 OF THE CITY OF LOS ANGELES m m

Dated:

Z---- " Co' APPROVED AS T FORM AND LEGALUY rIc ROCKARD J.DELGAULO. ClY ATTORNEY En OCT 1 6 2003 LA:

U.S. BANK NATIONAL ASSOCIATION, as Tr ^ i Dated: 4 1l&A [k. f2Q(

d l-- By:

Linda Verstuyft Vice President REQUIRES CTY COUNCIL APPROVAL